Deutsche Bank and Banc of America Securities were picked to lead Hexcel Corp.'s new $350 million senior secured credit due to their international banking presence. "We felt they had a strong ability to execute on the financing we wanted," said Stephen Forsyth, cfo. "They had the global reach that we needed as a global business." The Stamford, Conn.-based company, which develops and manufactures lightweight reinforcement products and composite materials for use in commercial aerospace, space and defense and industrial applications, has facilities in the U.S, Europe and Japan.
Hexcel's previous bank line, which was scheduled to expire in 2008, was led by Fleet Bank. Forsyth said bankers Hexcel had previously worked with at Fleet helped on this deal at B of A following the merger. "There is some continuity in that relationship," he said.
The facility, which consists of a seven-year, $225 million term loan and a five-year, $125 million revolver, refinances a $115 million bank deal. Credit Suisse First Boston and Wachovia Securities are the co-documentation agents and between banks and institutional investors for both tranches, there are more than 80 lenders involved in the syndicate, Forsyth said. One of the lenders is Goldman Sachs Credit Partners, affiliates of which own approximately 24.6% of the total voting power in Hexcel.
Forsyth said the company refinanced now because the strength of the credit markets made the pricing right. The pricing for the facility is on a grid starting at LIBOR plus 1 3/4% for the term loan and LIBOR plus 2% for the revolver. This compares to the pricing on the previous revolver of LIBOR plus 2 1/4%. Along with its new line of credit, the company also issued $225 million of 6 3/4% notes. The new debt refinances $125 million of senior notes due 2008 and will also refinance $100 million of 9 3/4% senior subordinated notes and $19.25 million of 7% convertible subordinated debentures. Hexcel will have more pre-payable debt that can be repaid as the company generates free cash flow. The company has been deleveraging and will continue to deleverage, said Forsyth. Additionally, the new balance sheet arrangement pushes out the nearest maturities to 2011.
Chris Kinslow, managing director, was Hexcel's point man at Deutsche Bank and Jeff Lynch was the contact at B of A. Hexcel and Deutsche Bank have had a long history, although the bank has not participated in the company's most recent deals. "As part of our corporate coverage, we try to stick with companies," Kinslow said. "This company always had an open door for us and we never gave up. We continued to call on them proactively and give them options on both debt and equity financing options, both in the U.S. and abroad."