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Sub Debt Struggles

12 May 2001

Bankers are keeping a close eye on the $700 million bank deal for U.S. Industries, speculating that a crucial $100 million junior subordinated debt piece of the financing package may not be filled. The credit, led by Credit Suisse First Boston and Deutsche Bank, hinges on the company rounding up $550 million in subordinated debt, including the $100 million junior piece. CSFB and Deutsche Bank are trying to sign up private equity investors. Officials at U.S. Industries declined to comment. Officials at CSFB and Deutsche Bank did not return calls by press time.

Bankers said the company's announcement last week that net income fell 97% for the Iselin, N.J.-based maker of lawn and garden products, due to a weaker U.S. economy and colder weather, has further hampered the deal, adding to speculation that it will not be completed. A banker close to the situation, however, said the deal is far from dead and one private equity investor he declined to name has been brought in thus far and he expects others to sign on. The bank credit comprises a five-year, $225 million revolver and a $200 million term loan "A" priced at LIBOR plus 3% and a five- and a half-year, $275 million term loan "B" priced at LIBOR plus 3 1/2 %.

12 May 2001