Medical device company dj Orthopedics amended its "B" loan to reduce the spread from LIBOR plus 2 3/4% to LIBOR plus 2 1/4% after redeeming notes and being upgraded by Moody's Investors Service and Standard & Poor's.
The company redeemed $75 million of senior notes due 2009 on the first call date of June 15. "We utilized cash in the bank for that plus $56 million in net proceeds from a February follow-on offering," explained Mark Francois, the company's director of investor relations. "Having that debt off of our books prompted Moody's and S&P to upgrade us. Those upgrades facilitated the change in the term loan."
The "B" loan is now $97.5 million but was originally $100 million. It was put in place in November, along with a $25 million revolver, to fund the company's $93 million acquisition of the bone growth stimulation business from OrthoLogic Corp. The revolver is priced on a grid tied to leverage and ranges from LIBOR plus 2 3/4-3 1/2%.
The "B" loan was syndicated to existing lenders who all rolled over. "If they had not been interested it would have gone out to others," said Jill Church, dj Orthopedics' v.p. and controller. "But all of the existing lenders were happy with the amendment." The company went to lead bank Wachovia Securities with the idea for the price cut. "We approached them but we kind of had an idea that we were going to do this prior to the follow-on offering," Church noted. "Wachovia knew and understood our intent. It wasn't a surprise to anyone."