Airgas has amended and restated a $450 million credit facility, pulling off $2.4 million of annual interest cost savings and bringing in J.P. Morgan and Bank of New York as joint leads with long-term lead lender Bank of America. "Airgas saw that the loan market was good and thought it was prudent to access the market right now," said Joe Sullivan, v.p. and treasurer of the distributor of industrial, medical and specialty gases.
The new five-year, $450 million senior unsecured credit facility includes a $308 million revolver, a C$50 million revolver and a $100 million term loan. The previous loan, which was maturing July 2006, originally comprised a $367 million revolver with a C$50 million revolver. Airgas tacked on a $100 million term loan to acquire the U.S. packaged gift business of Air Products & Chemicals last July. "We would have likely had to refinance in the summer anyway," Sullivan noted, adding that Airgas does not like to leave less than a year of maturity under the revolver. But the market is making available very attractive pricing and terms, he said.
When Airgas was thinking of doing the amendment it approached the majority of its lead banking institutions and asked them for ideas before submitting an aggressive mock term sheet to them. "We said tell us what you think the market would bear for Airgas," Sullivan said. "J.P. Morgan is bookrunner for the first time jointly with B of A and we were quite impressed with both of them," Sullivan noted. Airgas brought J.P. Morgan on board "just to add some competition and because they have an emerging relationship with Airgas." The previous deal was solely led by B of A and BNY was documentation agent.
The new deal is priced at LIBOR plus 95 basis points with an unused fee of 20 basis points. The company went out initially at LIBOR plus 1% with an unused fee of 22 basis points, but an oversubscribed deal allowed a further cut. The previous facility was LIBOR plus 2% with a fee of 40 basis points. Some traditional institutional lenders decided to step out due to the significant price cut, while some banks were added, Sullivan said. In total, the syndicate only shrunk by one.
Airgas also switched Canadian agents swapping CIBC World Markets for Bank of Nova Scotia. "Bank of Nova Scotia better suits our long-term strategy," said Sullivan, explaining that Scotia has a strong lending platform in Mexico and Canada--markets where Airgas has a significant focus.
Oscar Cranz at B of A and Peter Demaria at J.P. Morgan were instrumental in the amendment process, Sullivan noted. "Cranz has been the key person from Bank of America working with Airgas' syndications for a number of years and I have the utmost confidence in him. I would recommend him to anyone," he underscored.