Sugar Land, Texas-based Imperial Sugar has put in a new four-year, $100 million asset-based revolver with Bank of America as the sole lender. Aiming to shrink its bank group and have fewer covenants and better pricing, Imperial Sugar put its former bank group through a competitive bidding process for its business.
"We were looking to have a smaller group of lenders and went from a group of six or seven lenders with Bank of America as the lead and ended up working with just B of A," said Darrell Swank, senior v.p. and cfo of Imperial Sugar. Other lenders who put forward proposals for Imperial Sugar's business included GE Capital, CIT Group, J.P. Morgan and Société Génerale.
"We found it to be an extremely competitive process where we had asset-based lenders trying to figure out more flexibility than historically asset-based lenders would in terms of covenants, collateral and pricing," he noted. "The asset-based lenders are moving up from a middle-market perspective into some situations where formally they weren't as competitive versus the cash-flow facilities," Swank added. J.P. Morgan and B of A proposed both cash flow and asset-based options.
Imperial Sugar not only shrunk the number of banks involved in the line, it also removed a number of assets from the previous revolver. "In fact we basically have a facility without any financial covenants other than a liquidity trigger," noted Swank. The pricing on the old debt was LIBOR plus 2 1/4-3% and the new facility is priced at LIBOR plus 1 1/4-2 1/4%. The line can have seasonal increases to $125 million and replaces an existing $140 million asset-based line.