Polymer Group has scored a new $475 million credit facility from Citigroup after the bank pitched the best offer to lower the company's cost of capital. Polymer, a producer of non-woven textiles, was paying 12% interest on debt associated with its exit from Chapter 11 bankruptcy. The company needed better pricing and Citigroup offered it, stated Dennis Norman, Polymer's v.p. of strategic planning and communications.
The new credit facility replaces a $466 million exit financing J.P. Morgan put in place early last year. That deal comprised a $416 term loan priced at LIBOR plus 9% with a 2% LIBOR floor and an additional 1% for a senior leverage ratio fee; and a $50 million revolver was priced at LIBOR plus 6%. The new facility consists of a $300 million secured first-lien term loan and a $125 million second-lien priced at LIBOR plus 3 1/4% and 6 1/4%, respectively. It also includes a $50 million revolver priced at LIBOR plus 3%.
"Citigroup did a tremendous job in this whole transaction," Norman underlined. The advantages of the new facility also include structural flexibility to execute the company's expansion strategy.
Citigroup is the sole lead on the new credit after a bidding process. "We had a process where different lead banks made presentations for us and we chose the lead bank with the best deal and the best market execution and reputation," said Norman. He declined to comment on whether or not J.P. Morgan submitted a proposal to the company and who the other bidders were. A J.P. Morgan spokesman said the bank chose not to participate in the new deal, but declined further comment.
According to Norman, Polymer's sequential quarterly improvement in profitability during 2003 allowed the company to get the interest reduction. The market's appetite for loans also translated into lower interest rates that made the transaction feasible, he said. "This was an initiative that the company had been pursuing since late last year. The strong bank market with our strong results last year created this opportunity for us," he stated.
Along with the refinancing, MatlinPatterson Global Opportunity Partners, Polymer's majority shareholder, exchanged $41 million of junior convertible notes into preferred equity shares. The fund acquired more than two-thirds of Polymer's bonds after the company filed for bankruptcy in 2002.