FMC Corp. was able to take advantage of a borrower-friendly market and the removal of some uncertainties regarding its affiliate, Astaris, to reduce the spread on its term loan by 21/4%, explained Eric Norris, FMC's director of investor relations. The $247.5 million term loan originally carried a pricing of 43/4% over LIBOR. The company initially refinanced its loans in October 2002, a tough time for borrowers in the credit markets. With the current improvements in the credit markets and the economy, the spreads on the old term loan were steep in comparison to those currently doled out to issuers, Norris explained.
The company was also able to get a more favorable spread on its term loan because of the removal of uncertainties with Astaris, a joint venture between FMC and the now-bankrupt Solutia. FMC entered into an agreement with Astaris' lenders in 2000 whereby FMC agreed to make "keepwell payments" to make up for half of the shortfalls in Astaris' earnings below certain levels. Solutia had a similar agreement. In October, however, Astaris announced that it was working on a plan to restructure and would like to be debt free by the middle of 2004. In conjunction with that restructuring, FMC was able to cap its future keepwell payments, removing a degree of uncertainty. FMC was also able to ease the leverage covenant under is own credit largely to accommodate the restructuring.
The company's original loan comprised a three-year, $250 million revolver and a five-year, $250 million "B" term loan. The company maintains the $250 million revolver, although the facility is currently undrawn. There were no changes made to the revolver, which was originally priced at LIBOR plus 31/2%. Citigroup, Banc of America Securities and Wachovia Securities are the co-lead arrangers and co-book managers for the deal. ABN Amro served the role of administrative agent. Norris said the company is in constant dialogue with its banks throughout the year and it was a mutual decision to pursue the repricing.