York Nears Bank Lines for $500 Million
As part of a major recapitalization, York International Corp. expects to receive commitments as early as this week for a new $500 million loan package, according to a company official.
York has been negotiating with Canadian Imperial Bank of Commerce and Chemical Bank.
An official at the Canadian bank declined to say whether commitments were imminent, but other bankers said they have already been contacted by CIBC about participating in the general syndicate.
The new loans would be used to refinance existing bank debt and to repay other higher-cost public and private debt stemming from the 1988 leveraged buyout of York for $750 million by a group of investors led by Citicorp Capital Partners.
Citicorp's Stake Would Shrink
Citicorp currently owns 44.7% of York's common stock, but its ownership interest would be diluted to 29.4% as a result of a planned public stock offering by York. Proceeds from the offering would also be used to pay down buyout debt.
Earlier this month, York filed with the Securities and Exchange Commission to sell up to 12.3 million new common shares through an initial public offering managed by Prudential Securities Inc. and First Boston Corp.
On the basis of an expected offering price of $22 a share, the company said, it expects to raise about $221 million after expenses.
York's existing shareholders, including Citicorp, are not selling any of their shares in the public offering.
The new bank credit would be the second major York financing for which CIBC was the agent. In late 1988, the Canadian bank led a $500 million credit that was used by York to refinance initial buyout loans from Citibank.
Half of Loans Paid Off
As of March 31, York had already paid off about half of the 1988 loan.
Chemical is not a member of York's existing bank group, and it was not immediately clear how it became involved in the new credit.
Officials at York and CIBC wouldn't comment, and officials at Chemical weren't available.
The prospect of York replacing high-cost debt with equity prompted Standard & Poor's Corp. this month to place the Pennsylvania maker of air-conditioning and refrigeration equipment on its CreditWatch, pending a possible ratings upgrade.
Even after the recapitalization, though, York would continue to be classified as a highly leveraged transaction, or HLT, according to Joseph Rice, the company's treasurer.