Solutia Extends Credit Before Expiration Date

  • 11 Aug 2002
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Solutia has extended its credit facility and reduced its borrowing capacity but will pay a steep price--an extra 400 basis points--for the change. The bank loan was to exire on Aug. 13 but will now expire in August 2004. In addition, the total credit was reduced by $200 million because the company did not need the excess borrowing capacity, explained Kevin Wilson, treasurer.

The pricing on the loan was increased significantly. The former credit was linked to a leverage-based grid, which rested at LIBOR plus 13/ 4% at the time of refinancing. The new credit is priced at LIBOR plus 53/ 4% for both a revolver and term loan. Wilson declined to comment on the reason for the price increase, but he noted uncertainties regarding the PCB litigation against the company's plant in Anniston, Ala. The amended bank deal also offers lenders additional collateral.

The amended and extended facility now comprises a $300 million revolver and a $300 million term loan. The original five-year, $800 million revolving credit was syndicated in August 1997. The term loan was carved out in order to create liquidity, allowing lenders to more easily trade the paper and therefore reallocate the risk, Wilson said.

With the completion of the two-year extension, funds from Solutia's $223 million note offering were released from an escrow account. The notes mature in seven years and will yield 131/ 2%. Wilson declined to comment on why the company chose to seek an extension rather than a new syndication. Bank of America and Citibank led the credit as well as the bond offering.

  • 11 Aug 2002

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1 Citi 3,691 11 20.70
2 Morgan Stanley 2,420 6 13.57
3 Goldman Sachs 2,096 5 11.75
4 BNP Paribas 1,686 6 9.45
5 Barclays 1,565 4 8.78

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5 Credit Suisse 23,189.41 72 6.19%