Due to increased bank participation, Washington Group International was able to eliminate its institutional investor-funded $102.5 million tranche "B" revolving credit by moving $102.5 million into the cheaper bank-funded tranche "A" revolver. The global engineering and construction player implemented the two revolver structure because bank participation was initially too small for the $350 million revolver it wanted, said Earl Ward, treasurer. Ward attributed the idea of dividing the revolver and using institutional investors to Credit Suisse, the facility's lead bank. The deal was put in place in 2003 (LMW, 10/27/2003).
The privately-owned company has improved its credit ratings since emerging from bankruptcy in 2002 and the change was possible, according to Ward, both because of increased support from banks already participating in the facility and the addition of several banks, including Abu Dhabi International Bank.
Pricing on the "B" revolver was LIBOR plus 1 3/4%, while the "A" revolver is currently priced at LIBOR plus 50 basis points with the possibility of decreasing to LIBOR plus 25 basis points depending upon the company's private senior secured debt ratings.
Ward said the more favorable pricing of the tranche "A" was the biggest effect of the restructuring, but added the Boise, Idaho-based company sees a further pricing cut as a possibility. "We think that there is still some potential to reduce the facility cost; we're always evaluating that to lower our cost of capital," he said. "The four-year term gives us a flexibility to go back to the market or not, depending on market conditions."
The company added Abu Dhabi as part of its effort to expand its Middle East presence. "We try to have a syndicate of financial institutions that have a strong presence around the world," said Ward. He mentioned Commerzbank as another member of the 14-bank syndicate that has helped solidify the company's presence in Germany. Washington Group, which provides integrated engineering, construction and management services to governments and businesses, currently has a presence in over 30 countries.