A quick end to an employee strike has put syndication back on track for Stillwater Mining Co.'s $180 million refinancing, which was interrupted when employees' rejection of a labor agreement left the credit in limbo. The strike took place at Stillwater's key mine, accounting for 75% of its production.
Lead arranger TD Securities had closed the book on the credit but had not allocated because of the pending labor issue, a loan investor said. The buysider added that investors have not yet seen the details of the new contract, but are expecting TD to come out with more information shortly. "The potential lenders would prefer to have some resolution before they would disperse cash is what it boils down to," noted Gregory Wing, Stillwater's cfo.
The credit comprises a $40 million revolver and $140 million "B" loan. The "B" loan is priced at LIBOR plus 3 1/4% and the revolver is priced on a grid and is currently at LIBOR plus 3%. The investor said he does not expect pricing to change due to the strike. "Since [the strike] was so short in duration I don't think there is any real problem going forward," noted Dominick D'Ascoli, an analyst with Standard & Poor's. Still, S&P has kept Stillwater's bank loan ratings on negative watch because of the uncertainty with the final terms and conditions of the new facility. TD bankers did not return calls.
Stillwater had been in negotiations for a new labor agreement since June, Wing said. A tentative agreement was reached around the time the previous one expired and the union recommended approval but the members did not, Wing added. The workers went on strike July 12, but on July 20 the members approved a new agreement and returned to work July 21.
D'Ascoli said the strike could have had an unfavorable impact on the company's liquidity profile. "Just from the fact that the one mine--the Stillwater mine--was going to be running at less than full production [means that] they would have been pulling out less material, lowering sales and effecting their cash flow," he said. The investor reiterated this position. "The liquidity issue would have been [there] if the strike was ongoing for weeks, maybe months even--since it was resolved so quickly I would not expect it to be an issue," he said.
The company wanted to refinance because it had covenants in its current facility that were based on production levels, D'Ascoli explained. "It wasn't conducive to setting up the mines in the most efficient manner," he added. Stillwater's existing facility does not expire until 2007.
Stillwater is the only U.S. producer of palladium and platinum. An affiliate of Russian-mining company MMC Norilsk Nickel bought a majority of Stillwater in 2003. The shares were purchased with $100 million in cash and 877,000 ounces of palladium in a vault in London (LMW, 5/24).