Bear Stearns Joins Deutsche Bank On Aearo Buyout

Bear Stearns joined Deutsche Bank in leading Aearo Corp.'s $175 million credit facility after Bear Stearns Merchant Banking bought the personal protection equipment maker from Vestar Capital. The private equity arm of Bear Stearns acquired Aearo for $385 million, including debt of approximately $210 million. To complete the purchase, the company also issued $175 million of bonds priced at 8 1/4%. "Bear Stearns is taking a prominent role in the new facility due to the acquisition of the company by Bear Stearns," said Jeff Kulka, cfo, treasurer and senior v.p. for Aearo.

The new facility consists of a $125 million term loan 'B" and a $50 million revolver priced at LIBOR plus 2 3/4%. It replaces a $100 million "B" loan priced at LIBOR plus 3 1/4% and a $135 million revolver priced at LIBOR plus 2 3/4%. The new facility will also be partly used to repay $100 million of bonds priced at 12 1/2%. Deutsche Bank was a lead in the old facility and advised Aearo on the transaction.

Since the credit facility was due in 2005, Aearo could have waited longer to refinance. But since capital markets were favorable and due to the sale of the company, Aearo negotiated with Deutsche Bank and Bear Stearns to put a new facility through, Kulka said. The favorable market and the company's performance allowed Aearo to get improved interest rates, he noted. From this transaction, Aearo has also obtained more favorable covenants and terms, Kulka added.

Aearo's management team owns approximately a quarter of the company's fully diluted common stock. Vestar, which has been involved with Aearo for eight years, has retained up to 10% of company's stock with the option to invest additional equity in the future.