Wellspring Capital Management portfolio company JW Aluminum Co. is taking out its expensive mezzanine debt with lower cost bank debt led by Credit Suisse First Boston. The mezzanine debt was put into place along with bank debt last December when Wellspring purchased the producer of specialty flat-rolled aluminum products. "Given how well the company has performed--EBITDA has gone from $25 [million] to $35 [million]--we thought it would be a good time to lower the weighted cost of debt and do an all bank deal," said William Dawson, a partner with Wellspring.
The $27.5 million of mezzanine debt is priced at 16%. The company will pay a 6% prepayment penalty as a result of the transaction, but it's worth it, Dawson said. The new credit comprises a $25 million revolver and $90 million first-lien term loan at LIBOR plus 3 1/4% and a $40 million second-lien term loan at LIBOR plus 7%. The previous bank debt was about $60 million of funded debt and a $10 million revolver.
CSFB is leading the refinancing, replacing previous lead arranger GE Capital. "GE is involved, but we're doing more of an institutional deal now and less of a club deal," Dawson explained. Proceeds from the refinancing will also be used to pay an $18 million dividend.