Clean Harbors Plots Early Refi Of High Priced Debt

  • 22 Sep 2002
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Clean Harbors is planning to refinance approximately $155 million of term loans within the next year, after accumulating highly priced debt to finance the acquisition of Safety-Kleen Corp.'s chemical services division for $34.3 million and the assumption of $265 million in environmental liabilities. The debt carries a heavy interest spread because the financing commitment for the acquisition had to be in place within a short time frame, explained Steven Moynihan, senior v.p., planning and development for Clean Harbors, a provider of hazardous waste services based in Braintree, Mass.

The debt comprises a $115 million, three-year, non-amortizing term loan at LIBOR plus 71/ 4%, and a $40 million five-year, non-amortizing subordinated term loan with an annual interest rate of 22%. "It was clearly done to get it closed," Moynihan said of the financing. It has not been decided whether the replacement debt will be via the high-yield bond or bank markets. Once the opportunity is there, Clean Harbors will look at which institution will lead the refinancing, Moynihan commented. "Once we realize synergies, and have some numbers to show, then we can go and look to refinance," he clarified. Ableco Finance, an affiliate of Cerberus Capital Management and Oak Hill Securities Funds lead the senior term notes and subordinated notes. There are prepayment penalties on the senior debt of 2% in year one, 1% in year two and 1/2% in year three. On the subordinated debt there is 3% through year three and 11/ 2% for years four and five.

In conjunction with the acquisition Clean Harbors inked a new three-year, $100 million revolver, led by Congress Financial, Clean Harbors' current backer. "The sub debt is already syndicated, but the $100 million line will be syndicated soon," he noted. Congress is comfortable holding the entire line, but they will look, "in their own time," to bring in more lenders, he said. The line has not been drawn down. A $25 million piece of convertible preferred stock paying a 6% dividend is also being used to fund the transaction. The purchase price was $46.3 million, but it was reduced partially because of a fire at one of the New York facilities acquired and a reduction in the amount of working capital assumed.

The bank deal received a B2 rating by Moody's Investors Service, with Catherine Guinee explaining Clean Harbors is attempting to integrate a company almost twice Clean Harbors' size (LMW, 9/9). The unresolved issue of whether government authorities overseeing environmental liabilities or the lenders, would have seniority on claims in a default scenario was raised by Moody's. However, Moynihan said, "There is only $100 million of liabilities due over the next five years." The liabilities stretch over 20 or 30 years after that, he added.

  • 22 Sep 2002

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Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Citi 7,029 20 10.95
2 Bank of America Merrill Lynch (BAML) 6,703 19 10.45
3 JP Morgan 4,776 10 7.44
4 Credit Suisse 4,718 9 7.35
5 Deutsche Bank 4,262 13 6.64

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Rank Lead Manager Amount $m No of issues Share %
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1 Wells Fargo Securities 67,591.81 167 11.54%
2 Bank of America Merrill Lynch 57,568.62 162 9.83%
3 JPMorgan 55,390.36 159 9.46%
4 Citi 55,051.46 160 9.40%
5 Credit Suisse 43,756.73 120 7.47%