FMC Corp. said it signed a new $700 million credit agreement with a group of 22 lenders led by its long-time agent bank, Morgan Guaranty Trust Co.
Though an existing $583 million revolver, obtained in 1987, was not sent to expire until May 1994, FMC was able to win more favorable pricing and looser covenants on the new deal, reflecting its reemergence earlier this year as an investment-grade credit.
In February, Standard & Poor's Corp. upgraded FMC to BBB-minus on the strength of the company's operating performance and improved balance sheet.
To fend off a possible hostile takeover, FMC underwent a leveraged recapitalization in 1986, which knocked its balance sheet "out of whack," noted Martin Knoblowitz, an S&P analyst.
High Debt Ratio
Since then, though, the company has pared its debt substantially with internally generated funds. Still, FMC's ration of debt to capital is fairly lofty, at over 70%.
The borrowing rate on the company's new five-year revolver is 75 basis points over the London interbank offered rate, compared to 112.5 basis points over Libor under the old credit agreement.
Those rates, however, bear no resemblance to FMC's real borrowing costs. As a result of a competitive bid option, FMC has been paying just 18 basis points over Libor.
The new credit agreement also provides for a facility fee of 25 basis points, but there is no additional usage fee.
As of June 30, FMC had drawn down about $200 million under the old credit pact.
Few Financial Constraints
Apart from requiring the company to meet certain financial ratios, the new credit agreement imposes few, if any, financial restrictions on the company, said FMC treasurer Frank Riddick.
He said the mix of banks in the new credit has also changed somewhat, reflecting FMC's desire to include more foreign banks.
International sales accounted for 43% of FMC's total 1991 revenue of $3.9 billion.
The core members of the Morgan-led bank group remained in the new credit agreement. Some regional lenders were dropped.
FMC added some Japanese lenders and expanded relationships with European banks, Mr. Riddick said.
Despite the well-publicized capital constraints facing Japanese banks, they are still trying to build corporate relationships in the U.S. market, particularly in the Midwest, Mr. Riddick said.