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URS ‘B’ Piece Edges Closer As Bonds Await Pricing

07 Aug 2002

Credit Suisse First Boston and Wells Fargo Bank reportedly are close to filling the $350 million "B" term loan for San Francisco-based URS Corp. Bankers said the six-year "B" piece had gained $305 million in commitments as of this week. The banks are asking for final commitments to be in before the accompanying $250 million senior note offering is priced, which is expected to happen later this month, one banker noted. Officials at the banks either declined to comment or did not return calls.

Most buysiders and bankers have expressed positive sentiment on the credit, citing the access to government contracts as important, especially in the current climate for defense spending. EG&G provides outsourced engineering, technology and operations management services to the U.S. government, which is a tough sector to break into, one banker noted. "Not only is it difficult to be on the approved list, the company has a large number of contracts outstanding," he added.

But there are certain factors weighing on investors. The heavy purchase price multiple has deterred some buysiders, while the leverage has others feeling uncomfortable. Furthermore, contracts are on a revenue-recognition basis, which means revenue can fluctuate heavily, one investor said. The performance of the bank debt of competitors, including Washington Group International, also may drag down on the credit, one banker noted.

In addition to the "B" piece, the senior bank debt comprises a five-year, $100 million revolver and a five-year, $200 million revolver that will be unfunded at close. Pricing on the "B" loan is LIBOR plus 3 1/2%, while the pro rata is priced at LIBOR plus 3%. The loan is a part of a $900 million financing package backing the $500 million acquisition of EG&G Technical Services from The Carlyle Group (LMW, 7/21). URS also plans to refinance $354 million of its existing debt. Calls to David Nelson, treasurer of URS, were not returned.

07 Aug 2002