Scotia Capital won the sole lead position on Kansas City Southern's new $371 million credit facility because of its continued financial support of the company, said Paul Weyandt, senior v.p of finance and treasurer. Scotia was the joint lead with Morgan Stanley on the company's previous facility.
Weyandt said Scotia had done a good job of leading the previous credit, prompting the company to award it the sole lead spot on the new financing. The company did not choose Morgan Stanley as a joint lead this time because it had used the bank as a mergers and acquisitions advisor in 2005 and wanted to share its business evenly amongst the banks. Morgan Stanley will, however, participate in the new facility. "Scotia did not have the same the opportunity as Morgan Stanley to do business with us in 2005. This was a way to reward them for their past support," said Weyandt.
KCS, a holding company that invests in railroads in the U.S., Mexico and Panama, rolled out the new facility because its previous one was due to expire. It is the same size as the last financing -- a $125 million revolver and a $246.1 million term loan "B" -- but pricing is 25 basis points higher because the company has been downgraded since its last financing. Moody's Investors Service downgraded KCS' corporate family rating to B2 from B1 in April. Standard & Poor's downgraded its ratings to B from BB. Both ratings agencies made the change because of a reduction in the company's liquidity. Pricing on the revolver is LIBOR plus 2%, while the term loan is priced at LIBOR plus 1 3/4%. Weyandt said he is satisfied with the pricing and had expected to pay more because of the downgrades.
Several new banks have joined the syndicate, including: Bank of America, Commerce Bank, National City, Mass Financial Group and the Export Development Corp. of Canada. B of A and EDC participated in KCS' Mexican credit facility and were invited to join the new U.S. facility. Weyandt said the company seeks banks that can support its operations in both countries. Bank of New York and Sumitomo Bank dropped out of the new facility. Weyandt said it was their decision to do so and declined to comment further.