Greif has closed a five-year, $350 million revolver with Deutsche Bank and Key Bank that pares interest costs and loosens covenants. Market timing was the number one reason the company decided to take out the loan. Robert Zimmerman, treasurer, said "The market was very fair to buyers; we wanted to clearly reprice the existing facility. We also wanted to dramatically loosen up our financial covenants." Another reason he cited was the company's improving credit profile.
Pricing for the loan starts at LIBOR plus 70 with a 30 basis point facility fee and is locked for six months before it steps down. The funds were used to pay off existing bank debt, which included a $230 million revolver and approximately $65 million left on a "C" loan. The pricing at the time the company paid off the debt was LIBOR plus 1 1/2% on both tranches with a commitment fee of 42.5 basis points on the revolver.
The remaining funds will be for general working capital purposes, Zimmerman said. The company, which provides industrial packaging products and services, could also use the funds for any kind of bolt-on acquisitions deals in the $50-100 million range. "We're always looking to see what makes sense," Zimmerman said. "But nothing strategically is in the works."
The history of the loan dates back to the company's acquisition of Van Leer Industrial in March 2001. Greif leveraged considerably and the costs of its loans were extremely high. In July and August of 2002, the company refinanced and issued some public debt. The loan in '02 consisted of a $300 million term loan and a $250 million revolver.
Deutsche Bank led the company's repricing in 2004. "It was a continuity of relationships," Zimmerman said. "They had shown some solid commitment to our relationship." He cited a similar long-term relationship with its other lead bank. "Key Bank has been a long term partner with us," he said. "This was to recognize the value of their partnership."
The one bank absent from the current loan is Citigroup, which had co-led with Deutsche Bank the loan Greif paid off with this facility. "Citigroup is no longer going with us," Zimmerman said. "It's more or less a mutual agreement. We asked them to stay, but did not offer them to lead. They did not have the lead so they opted to leave." Deutsche Bank and Key Bank officials did not return phone calls nor did a spokesman from Citigroup.