FMC Reworks Credit To Reflect Rising Star Status

FMC Corp. is anticipating becoming a rising star--moving from high yield to investment grade--and has amended its $600 million credit facility to remove its institutional tranche and put in much improved terms to reflect the uptown move.

  • 12 Nov 2004
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FMC Corp. is anticipating becoming a rising star--moving from high yield to investment grade--and has amended its $600 million credit facility to remove its institutional tranche and put in much improved terms to reflect the uptown move. "The market considers us to be a fallen angel," noted Thomas Deas, v.p. and treasurer. "Now we believe we've dealt with most of the issues that the agencies were concerned about in 2002 and they have each raised their outlook."

Standard & Poor's has maintained a BBB- rating for the chemical company but Moody's Investors Service downgraded the company's bank facilities to Ba1 in 2002. "We're anticipating a return to investment-grade ratings across all of our debt categories and so we've structured this facility so that security will fall away when both agencies give us investment-grade ratings," Deas commented.

Institutional investors will not be able to lend on an unsecured basis so the refinancing was done on an all pro rata basis with a syndicate of traditional commercial banks. Citigroup, Bank of America and Wachovia Securities lead the credit. "We were very pleased with the enthusiastic reception among commercial banks to our financing," Deas noted. "We received commitments that were two times the amount we originally sought." As a result of the oversubscription the credit was increased by $50 million.

The new credit comprises a $400 million revolver, $100 million term loan and $100 million letter of credit facility. "The pricing, terms and conditions are very much improved," Deas said. The revolver and term loan interest rate margins are at LIBOR plus 1%. At the inception of the previous credit in October 2002, the term loan margin was LIBOR plus 4 3/4%, Deas noted. That margin was repriced several times, most recently in June when the company cut the "B" loan spread by 75 basis points to LIBOR plus 1 3/4% (LMW, 6/21). The old credit comprised a $250 million revolver, $250 million term loan and $40 million letter of credit facility.

In addition to the improved pricing, many of the restrictions and covenants are eased more towards those seen in investment-grade deals, Deas said. More than half of FMC's sales are overseas. With this amendment, its foreign subsidiaries were added as eligible borrowers under the facility. "It will make it easier to repatriate foreign cash to pay down domestic debt," he explained.

Lenders on the new facility include ABN Amro, National City Bank, Société Générale, Sumitomo Mitsui Banking Corp., DnB NOR Bank, Bayerische Landesbank, Bank of Tokyo-Mitsubishi, Bayerische Hypo-und Vereinsbank, UFJ Bank, Banco Bilbao Vizcaya Argentaria, The Bank of New York, PNC Bank, Rabobank International, Bank of China, The Bank of East Asia, Crédit Industriel et Commercial, Fortis Capital Corp., KBC Bank, The Norinchukin Bank, Allied Irish Bank, Chang Hwa Commercial Bank, Erste Bank, State Bank of India and Bank Hapoalim.

  • 12 Nov 2004

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