Steel Dynamics picked J.P. Morgan and Morgan Stanley to lead a $550 million refinancing that includes $350 million of bank debt, after previous lead Mellon Financial sold a portion of its loan portfolio, including the old Steel Dynamics deal. Tracy Shellabarger, v.p. and cfo of Fort Wayne, Ind.-based Steel Dynamics, said, "Mellon sold loan portfolios to GE Capital a couple of months ago." He declined comment on whether GE bid to lead the credit after he started shopping elsewhere or why J.P. Morgan and Morgan Stanley were selected as replacements. The $350 million bank debt is a mixture of revolver and term loans, while there is also a proposed issuance of a $200 million in notes due 2009.
The bank meeting was held Tuesday, Shellabarger said, with pricing in the LIBOR plus 3 1/4% range. The new debt is designed to give a more balanced capital structure to Steel Dynamics, Shellabarger added. The old facilities comprised $450 million in loans and were arranged in 1997. The approaching maturity of the debt was one of the factors in the refinance, he noted, declining further comment on the exact composition. Mellon sold $2.6 billion in loans to middle-market and large corporate companies to GE in December 2001. This followed the divestiture of Mellon's mid-to-large and small ticket leasing businesses and asset-based lending business. Calls to Mellon officials were not returned.
Steel Dynamics operates a low cost flat-rolled mini mill that can produce 2.2 million tons of steel annually. Last year was comparatively tough for Steel Dynamics, due to the continued dumping of foreign steel into the U.S. market, combined with the weakened U.S. economy. The industry experienced historically low steel selling prices and tightened margins. According to a company statement, in June 2001, the U.S. International Trade Commission ruled that the U.S. steel industry had been seriously injured due to increased steel imports. In March 2002, Steel Dynamics hopes the Bush Administration will take action to provide comprehensive import relief, with expected positive effects for the U.S. steel industry beginning in the second quarter. A reduction in unfairly priced steel is expected to stabilize steel prices and benefit Steel Dynamics.