Hollister tapped First Union to lead an $80 million refinance credit that rolls up a series of uncommitted lines from various lenders. William Sauerland, treasurer, described syndication of the credit as a "formalization of all of our uncommitted lines." He explained the company's existing $80 million of available debt was previously split between numerous lines of unfunded 364-day revolvers, led by a handful of separate banks. "Given changes in the market, banks have gotten a lot smarter than they used to be with their asset-allocation models," he commented.
First Union launched syndication of the credit, which will be used for working capital and general corporate purposes, at a bank meeting two weeks ago. The new deal comprises a three-year, $40 million term loan "A" and a $40 million, 364-day revolver.
Sauerland said it was a lot easier to get the deal done as a single credit as banks have grown hurdle rates on minimum deal size requirements over the last couple of years. "I didn't want to get a line pulled just as I need it," he said, explaining, why one tranche now has a three-year maturity. Sauerland said the larger single deal size, in addition to the longer maturity on the new deal, resulted in a pricing increase. All-in drawn pricing is tied to a grid, with pricing starting at LIBOR plus 7/8%. "But, the deal was easier to do," he said. Sauerland expects syndication to be club-like with the syndicate entirely comprised of the past lenders on the multiple 364-day lines.
Sauerland noted that banks are increasingly more interested in prospective ancillary business and his company will provide it in forms such as cash management services, foreign exchange business, and pension fund management services. The deal is scheduled to close at the end of this month. Hollister is a manufacturer of medical products and supplies including lines in continence care, wound care, and mother/baby care.