Tough bond market conditions prompted COMSYS IT Partners to withdraw its plans to issue new notes in favor of a new credit facility. The IT company withdrew its proposed private offering of $150 million of senior notes, entering instead into a proposed $230 million secured credit facility with Merrill Lynch.
"The proposed offering was an opportunity for us to take advantage of what was perceived as a good bond market," said David Kerr, senior vice-president of COMSYS. "The market completely turned in September and October. Terms changed. It became a buyers' market. Yields increased and covenants got tighter."
COMSYS' bank lenders proposed the new credit facility, which it expects to close in December. Merrill Lynch leads the deal, which consists of a five-year, $120 million senior secured revolving credit facility, a two-year, $10 million senior secured term loan, and a five-year, $100 million junior secured term loan. The credit line replaces a $120 million revolving credit facility priced at LIBOR plus 2%, a $7.5 million term loan priced at LIBOR plus 3%, and a $70 million second-lien term loan priced at LIBOR plus 7 1/2%. Pricing on the current credit facility was not disclosed.
COMSYS plans to repay all outstanding borrowings under its existing credit facilities. It expects the availability under the new revolving credit facility to be approximately $50 million after it closes. It plans to use the proceeds for general corporate purposes, including acquisitions or investments in companies and technologies.