The National Rural Utilities Cooperative Finance Corp. (CFC) a privately owned, non-governmental organization that makes loans and provides business management services to rural electric utilities and telecommunications companies, expects to cut pricing and extend the tenor on $3 billion of investment-grade loans.
"There has been no major change with the company, but the market has become very strong," said Richard Eisenberg, v.p. and treasurer of CFC. "Banks are looking for assets and it's a form of asset they would like on the balance sheet."
J.P. Morgan, Bank of America and Bank of Nova Scotia launched syndication at a meeting earlier this month in Phoenix to the 24-bank syndicate. Of the company's $4.65 billion in revolvers, $3 billion of 364-day debt is maturing March 29. CFC also has $1.65 billion of three-year loans with two years left to run.
The company is going to refinance a good portion of the CP backstop with five-year debt, noted Eisenberg. He expects the spread to be reduced, but could not say where it would ultimately be. At present the company pays a facility fee of 8.5 bps on the 364-day facility fee and 10 basis points on the multi-year. The facility was not drawn and is not expected to be drawn. In the previous loan, up-front fees of between seven basis points and 16 basis points were paid to the banks based on their commitment level in each of the agreements, totaling $4 million.
All the banks in the syndicate provide some form of ancillary business to CFC. "They have to be in the credit facility to get our business," Eisenberg stated. He added that this business includes bond underwriting, commercial paper dealerships, trust and IPA business. For example, Bank of America, J.P. Morgan, Lehman Brothers and Merrill Lynch support the U.S. CP program. UBS and J.P. Morgan handle Euro CP and Goldman Sachs and Lehman does CFC's extendable commercial notes. "We spread it around," Eisenberg said, adding that this decision was taken in the last five years. He added that new banks are welcome into the syndicate and he anticipates one or two new banks joining.