Delco Remy International has selected Wachovia Bank and its subsidiary Congress Financial to lead a $250 million credit facility after incumbent BANK ONE pulled back from lending to the sector. "BANK ONE has not been very aggressive at lending and has been pulling back on the auto sector," said Raj Shah, cfo. BANK ONE has been pulling away from certain sectors and businesses that do not provide ancillary business, enabling the firm to meet profitability hurdles. A BANK ONE spokesman declined to comment.
Because the existing $200 million credit was set to expire next year, Delco wanted to put a new line in place, Shah said, explaining the timing of the deal. The new four-year revolver is an asset-based facility, whereas the existing credit was based on cash flow, he noted. The asset-based loan is more flexible for the Anderson, Ind., company as business on the re-manufacturing side is robust and the firm needs inventory to reflect this, he explained. Delco is a supplier of after-market products for automotive, heavy duty and industrial applications.
The interest expense is tied to how much is borrowed, Shah said, declining to provide more specific details. The credit rating for the existing bank loan is Ba3/BB-, but the new facility has not yet been rated. The loan will be used for general corporate purposes.