FMC Corp. has received a new unsecured $850 million credit facility from a group of lenders led by Citigroup, Bank of America and Wachovia Securities. Although the company had just put a secured $600 million facility in place last October, Thomas Deas, v.p. and treasurer, said FMC's financial performance was exceeding forecasted predictions, so it decided to go back to the bank group to see if it would drop the security and rework the facility's terms.
Treating the Philadelphia-based chemical company as if it was investment grade, the banks expanded their commitments and redid the deal providing better pricing and greater financial flexibility.
The loan will be used to redeem the entire $355 million principal amount outstanding of 10 1/4% senior secured notes and to support working capital needs of the business, which "fluctuate depending on the season, especially for sales to our Agricultural Products customers," Deas said.
The option of either directly borrowing or having letters of credit under a $250 million LC sub-limit is ideal for the company because Deas said it has a "large letter of credit need, particularly for tax-exempt financing, environmental remediation and self-insurance requirements."
With the new unsecured bank facility, the rating agencies re-evaluated the company. Standard & Poor's assigned a BBB- rating to the $850 million facility and raised the rating on existing senior notes to BBB- from BB+ and in its report wrote that this change reflects the noteholders improved recovery prospects following the removal of security from the facility. Moody's Investors Service upgraded all of the company's unsecured senior debt ratings to Baa3. Deas said that investment-grade status will allow the company greater access to the market.
"We are a capital intensive company," Deas said. "An investment-grade rating should allow us continuous access to the capital markets. Not having the full investment-grade rating, we can only really access the capital market when they are open for high-yield issuers and there are times when the markets are closed for them."
The facility consists of a $600 million revolver, of which $250 million is available in letters of credit, and a $250 million term loan. Pricing is LIBOR plus 75 basis points on both tranches. Deas said the deal was twice oversubscribed. The old credit consisted of a $400 million revolver, a $100 million term loan and a $100 million letter of credit facility. The revolver and term loan were priced at LIBOR plus 1% (LMW, 11/04).
Looking ahead, Deas said the company plans on continuing to pay down debt and is also looking at a variety of investment opportunities to grow the business.