Alimentation Couche-Tard has reduced the number of banks in its lending group to have a better handle on its relationships. Raymond Pare, senior finance director, said it is easier to obtain amendments with fewer banks in its syndicate. There are no institutional investors in the new facility. Lenders that want to hold loan assets on their books can also obtain a better return on investment when fewer banks are in the lending group, he explained.
"If we need to modify the facility it is easier to deal with 11 banks; you can be more efficient," said Pare. "With 23 banks it is hard trying to keep everyone happy. It is better to limit the number."
The Canadian convenience store operator cut its banks to 11 from 23 when it closed a new $500 million revolving credit facility last month. The five-year loan replaces a C$120 million revolver, a C$265 million term loan "A" and a $245 million term loan "B." There was C$16.9 million outstanding on the term loan "A" and $146.2 million remaining on the term loan "B." The company repackaged its previous loans into a single revolving credit facility to lower borrowing costs and obtain more flexible leverage ratio requirements, said Pare. Initial pricing on the term loan "A" and revolver was LIBOR plus 3% and LIBOR plus 1 3/4% on the term loan "B." Pricing on the new deal could not be determined.
The new facility is solely in U.S. dollars because most of the company's future business needs, including any future acquisitions, will be in the U.S, said Pare.
The National Bank of Canada, CIBC World Markets and Scotia Capital are lead arrangers. Bank of America and Caisse de depot et placement du Quebec are co-documentation agents. The three co-arrangers were leads on the company's previous facility. B of A has a new top role in the financing; previously it was only part of the syndicate. Couche-Tard awarded B of A one of its top spots after the bank worked aggressively on the refinancing. The company also uses B of A for treasury services. "We felt it was appropriate to recognize our ongoing relations with B of A by giving then a top role in the financing," said Pare.
The new financing will reduce Couche-Tard's borrowing costs by $2 million. While the company and its banks have an open line of communication, it was actually Couche-Tard that approached the banks to do the deal. "We always try to keep communication open. Most of the banks that follow us talk to us regularly."