National MENTOR is taking out $116.4 million of holding company preferred debt held by its sponsor, Madison Dearborn Partners, and replacing it with a "B" loan and $150 million of senior subordinated notes. The seven-year, $170 million "B" loan went out to investors at LIBOR plus 3 1/2%. Lead arrangers J.P. Morgan and Bank of America are also syndicating a new six-year, $80 million revolver. The revolver is also priced at LIBOR plus 3 1/2% and has a 50 basis points undrawn spread, a banker said.
The refinancing will result in a simplified capital structure as well as a lower cost of capital for the company, according to Moody's Investors Service. The senior debt has been rated B1 and the sub notes B3. The credit ratings reflect the company's high leverage, which is estimated at 5.4 times and the high reliance on government payors as a source of funding for most of its customers.
The Boston-based company provides home and community-based services for people with mental retardation and other developmental disabilities, at-risk youth and individuals with acquired brain injury. National MENTOR officials referred calls to a banker who declined comment. Bankers from J.P. Morgan and B of A either declined comment or did not return calls. Nicholas Alexos, a managing director with Madison Dearborn, was traveling and did not return calls.