Associated Materials, a portfolio company of Harvest Partners, is increasing its credit facility and cutting the spread as Investcorp acquires 50% of the company. Proceeds from the increased facility along with $75 million of holdco notes will be used to pay a $118 million dividend to the existing shareholders.
"Bank debt is the most cost effective way we see to get the transaction done," said Chris Whalen, a v.p. with Harvest. "The institutional term loan market is particularly strong. We have a very supportive lending group." UBS and Citigroup are leading the credit.
The amended and restated credit comprises an $80 million revolver and a $175 million term loan. The term loan is offered at LIBOR plus 2 1/4% and the revolver, which is subject to a leverage-based grid, went out at LIBOR plus 2 1/2%, a banker said. Whalen declined to comment on the existing spread, but said it is "slightly higher" than where the new one will be. The existing spread is reportedly LIBOR plus 2 3/4%. Pro forma leverage is 5.9 times.
UBS was the previous lead and Citigroup advised the company on the process. "In connection with that we thought it made sense for them to be joint lead in the financing," Whalen noted. Bankers from UBS and Citi declined comment. Keith LaVanway, Associated Material's cfo, and an Investcorp spokesman did not return calls. Associated Materials makes exterior residential building products including siding, windows, railing, fencing and decking.