Packaging products company Crown, Cork, & Seal extended the maturity of its existing $2.5 billion facility and secured an additional $400 million term loan in the wake of decreased credit ratings related to the company's asbestos exposure. Timothy Donahue, senior v.p. of finance, said he believed that overall the deal was a success despite some delays by participants related to the company's well-publicized asbestos exposure. "Some formerly supportive banks became unsupportive and then supportive again," said Donahue who declined to name banks or provide specifics related to syndication.
Donahue said Bank of America and Société Générale--which were on the company's previous credit--joined lead arranger J.P. Morgan Chase as agents on the deal, which also consisted of a 30 - bank syndicate. In terms of picking a lead arranger, Donahue said, "We wanted to leverage the fact that both Chase and J.P. Morgan participated in the past." When the credit was originally signed in 1997 as a commercial paper backstop, Donahue explained, that pricing was as low as LIBOR plus 25 basis points. But the pricing crept up to LIBOR plus 1 1/2 % after two amendments. Now, pricing on the $2.5 billion maturing in 2003 is LIBOR plus 2 1/2 % and the two-year, $400 million term loan is priced at LIBOR plus 3 1/2 %.
Donahue said asbestos concerns related to the company amid troubles with Owens-Corning prompted downgrades on the company's ratings now reflected in pricing. "If you had any asbestos exposure you were thrown into one pot," he said. In addition, the previously unsecured credit is now fully secured. "Eventually all the banks extended," he said. In addition, Donahue said covenants on the new credit are more flexible than they were in the past.