U.S. Industries is rounding up $700 million in bank commitments to retire existing debt and acquire a 75% equity interest in Rexair, Inc. from Strategic Industries. R. Bruce Clitheroe, treasurer of USI, added that the existing credit facility expires in December, and the new deal is contingent upon the successful sale of $550 million of 10-year subordinated notes. Parts of the proceeds of the notes will be used to pay down $100 million of the company's existing senior notes due '03. The bank group led by Deutsche Bank, was selected based on existing relationships with USI, Clitheroe said. Bank of America and Credit Suisse First Boston are also lead lenders.
The Iselin, N.J.-based Jacuzzi brand bath company also specializes in home improvement products. Rexair, a vacuum cleaner manufacturer formerly owned by USI, was sold to Strategic last year when USI was seeking to divest the business of non-core products, Clitheroe noted. USI was to guarantee Rexair's $200 million senior secured credit facility but had to maintain a senior unsecured credit rating of a minimum of Ba1 from Moody's Investors Service and a BB+ from Standard & Poor's. However, the agencies have placed USI on watch for a possible downgrade, which could trigger the guarantee, Clitheroe explained. USI will therefore reacquire Rexair from Strategic by refinancing Rexair's debt totaling $176 million to satisfy the guaranteed obligations and by canceling $27 million of Strategic securities held by USI.
The loan comprises a $225 million revolver, a $200 million term loan and a $275 million term loan "B." Pricing on the pro rata is 3% plus LIBOR with a maturity of five years, and the "B" loan is LIBOR plus 31/2 % with a five and a half-year maturity. Moody's have not yet assigned a rating to the deal, expected to close by the end of April. Pricing is geared towards what the market will bear, Clitheroe stated.