Kinetic Systems postponed its $210 million refinancing in conjunction with the decision to temporarily put its initial public offering on hold because proceeds from the IPO were to be used to reduce the company's total debt, said Judy Rogers, corporate treasurer. The Santa Clara, Calif., company decided not to move ahead with its IPO because it could not successfully complete the offering with any degree of certainty due to choppiness in the equity markets, she explained.
Kinetic Systems plans to pursue its IPO, as well as its refinancing, as soon as the equity markets become more receptive. "We are taking a wait-and-see approach," Rogers said. "It could be weeks or months, but this is not an indefinite postponement." Once the company decides to proceed with the IPO, it will check demand and appetite in the loan market to determine whether the proposed structure stays, she noted.
The proposed $210 million credit facility would have replaced a loan of comparable size that was put in place at the time of Kinetic Systems' leveraged buyout in August 2000. The existing facility is a straight term loan of six to seven years that was syndicated to both banks and institutions, but the new credit would have targeted institutions in a more defined fashion, Rogers said. Indeed, the proposed structure consisted of a $60 million revolver, a $50 million "A" term loan and a $100 million "B" term loan. Pricing was to be based on the structure and the company's leverage levels, but Rogers declined to disclose how spreads changed from the original loan. She noted, however, that Kinetic Systems is now a deleveraging story and that pricing was reflective of the current market.
Bank of Nova Scotia, which leads the current loan, was to serve as agent on the proposed credit as well. Kinetic Systems decided to stick with its current lead bank because it has been an excellent partner and it really understands the company's business, Rogers said. The proposed credit was to be syndicated to a combination of existing lenders and new players in an effort to build new relationships in the wake of the company's improved credit profile, she explained.