| Steven Stewart |
Headwaters tapped Bank One to lead its new $100 million credit facility to expand its banking relationship. Headwater's previous facility was led by GE Capital, but the company was looking for a large commercial banking relationship, said Steven Stewart, headwater's cfo. "We have a lot of banking needs with deposit accounts around the country and we wanted to move it to a larger bank," he said. Bank One topped a bidding process that included several other banks. "They seemed very responsive and very committed to service and their pricing was very competitive," Stewart said. He declined to name the other banks that made proposals. Stewart said he believes the Bank One merger with J.P. Morgan will benefit the company. "We think J.P. Morgan is a good organization so we think that will improve the quality of the service we get from Bank One."
The new facility, which comprises a $50 million revolver and $50 million "A" loan, is priced on a grid tied to leverage ranging from LIBOR plus 1 3/4-2 1/2%. The debt currently has a spread of LIBOR plus 2 1/4%. "Based on our leverage today it would be at 175, but we agreed to start it out for 90 days at the 225 level," Stewart said.
The previous deal consisted of a $20 million undrawn revolver and $70 million "B" loan. The "B" loan was priced at LIBOR plus 4 1/4%. Stewart said the company chose to do an "A" loan rather than a "B" because of increased flexibility and cost savings. "It is less restrictive and it falls within conventional banking so the interest rates are much better," Stewart said. Proceeds from the "A" loan were used along with cash on hand to retire the previous "B" loan and revolver borrowings will be used for strategic acquisitions.