Octel Corp. has put in place a new $150 million credit to ensure that it has the longer-term capital required to move it into the next stage of development, noted Paul Jennings, executive v.p. and cfo. With its new credit facility, Octel wanted the ability to fund acquisitions, provide a balanced return to shareholders through share buybacks and a progressive dividend policy, and to structure the company's balance sheet in an effective way.
The new loan comprises a $100 million term loan and a $50 million revolver. The facility is denominated in dollars, but the Manchester, U.K.-headquartered company has the option to borrow in other currencies on the revolver. The timing of the new credit facility was encouraged by the current favorable market conditions, but also because Octel wanted to replace its existing credit that had become classified as short-term debt without any syndication risk. The former facility originally included a $210 million term loan and a $40 million revolver, but Octel repaid a significant amount of its term loan over time, reducing the tranche to $117 million by the time of the refinancing.
The credit is a club deal with Lloyds TSB, Barclays and HBOS. Lloyds and Barclays are the mandated lead arrangers for the facility. The previous facility had a syndicate of 10 banks, but the three chosen for this facility presented Octel with the best offer, Jennings explained. He noted that the company was aggressive but fair in terms of its pricing negotiations. The pricing on the loan is lower than the previous facility and varies between LIBOR plus 125-195 basis points depending on the company's net debt-to-EBITDA ratio rather than between 125-237.5 basis points.
The previous facility was also secured. In comparison, the new loan starts as a secured loan, but there is a security release mechanism that is triggered when Octel pays down a certain amount on its term loan. The company expects to reach that mark some time in the middle of the credit's tenor, which is three-and-a-half years, Jennings explained.