Black Diamond Capital Management stands to reap the rewards of its position in American Safety Razor Co. as UBS markets a $225 million refinancing that will take out the existing bank debt that Black Diamond harvested from original lenders. The original facility was put into place in 1999, when J.W. Childs acquired ASR and was led by Bank of America and Credit Suisse First Boston. The company's existing bank debt totals approximately $85 million.
Black Diamond bought 60-70% of the debt directly from other lenders in the secondary market. The prices at which the firm purchased the paper could not be determined, but the debt had been trading at distressed levels prior to the past year. Black Diamond then offered up a new deal to take out the 30-40% it didn't already own. "[Black Diamond] came and offered an amendment where we lowered our cost," noted Adam Suttin, a partner with J.W. Childs. "They bought out the rest of the banks by making a new loan to us, which we used to pay off the rest of the banks." That portion of the debt was paid off at par. Black Diamond officials could not be reached by press time.
The other lenders at one time included BHF Capital Corp., Morgan Stanley Dean Witter Prime Income Trust, Stein Roe's floating rate funds, Van Kampen Senior Loan Fund, KZH Soleil, Fleet Bank, Summit Bank and The Provident Bank. Calls to those lenders were not returned by press time.
The new facility comprises a five-year, $25 million revolver; a seven-year, $150 million first-lien term loan; and a seven-and-a-half-year, $50 million second-lien term loan. Price talk is LIBOR plus 3% on the revolver, LIBOR plus 31/2% on the first-lien and LIBOR plus 61/2% on the second-lien tranche. There is call protection of 102,101 on the second-lien term loan.
In addition to taking out the existing debt, proceeds from the new deal will be used to prepay about $70 million of bonds. According to Standard & Poor's, the new debt will improve liquidity and reduce interest costs. ASR presently has $60 million of "A" and "B" loans and a $25 million revolver. The facility is priced at LIBOR plus 31/2%. "We feel like the markets are at a favorable position and our bank debt and bonds would require refinancing some time in the next 12 months, so we just felt like this was a good time," said J. Andrew Bolt, ASR's cfo.
UBS was chosen because of "their ability to get this type of transaction completed and the relationship with our principal shareholder, J.W. Childs," Bolt said. "We have a strong relationship with UBS and they have preformed quite well for us in a number of financings," Suttin said. UBS bankers declined comment. Bolt declined to comment if B of A and CSFB made proposals for the refinancing.