Lear Corp. has received commitments from four of its largest lenders for a new $800 million credit, according to a filing with the Securities and Exchange Commission. Deutsche Bank, JPMorgan, Bank of America and Citigroup will be providing Lear with the senior secured term loans. The loans are expected to be in the six-year range, maturing no earlier than March 2012. Lear is planning to use the new facility to refinance debt from the company's $400 million term loan that matures in February 2007. The rest of the credit will be used to pay down Lear's convertible senior notes and for day-to-day operations of the company.
In addition to the new term loans, Lear is also receiving an amendment to its existing credit facility, a $1.7 billion revolver entered into in March 2005. The amendment is expected to provide collateral to the revolver and the new term loan facilities, as well as increase the flexibility of the company's existing financial covenants, according to a Lear spokeswoman. Terms of the amendment could not be determined. The same four banks that lead the new term loans lead the amendment. "It's a little surprising that they got an amendment and a new facility. I figured that it would be one or the other," one investor noted.
Last week, on news of the amendment and new credit, Lear's 8.11% '09 bonds were up three points to 93, while its five-year credit default swaps tightened 100 basis points to 725. Two weeks ago, the company's CDS tightened 50-60 basis points to 800 as the market anticipated the amendment (CIN, 3/27). "They're trying to maintain their liquidity with the amendment and this news has definitely affected their bonds the last couple of weeks," a second investor noted. As a result of the new credit and restatement, Moody's Investors Service has affirmed Lear's corporate family rating at B2 with a negative outlook and may downgrade that rating due to the subordination of unsecured debt.
A third investor was contemplating whether the pricing would be attractive enough to draw many investors to the deal, given some of the issues Lear has been experiencing lately. In addition to the amendment and new credit, last week Lear sold most of its interior products business to International Automotive Components Group, a company run by Lear, Franklin Mutual Advisors and WL Ross & Co. Calls to Deutsche Bank and Citigroup were not returned. Bankers at B of A and a spokesman at JPMorgan declined to comment.