DRS Technologies amended and restated its credit facility to work with a $350 million note offering backing the $550 million acquisition of Integrated Defense Technologies. The facility comprises a $175 million revolver and $235 million "B" loan. The revolver and "B" loan were each increased by about $25 million, noted Richard Schneider, DRS' cfo. "I think now interest rates are near historic lows and the banks have an appetite to write loans and we had a need for some additional funds," Schneider said. "Everything lined up well for us."
The amendment cut pricing to LIBOR plus 13/4% from LIBOR plus 21/2%. Prior to the amendment, the loan was priced on a grid tied to leverage and the interest rate would have come down to LIBOR plus 21/4% at the end of the quarter, Schneider noted. "It theoretically moved us forward about six-to-nine months," Schneider said. "Where we were at the point of amendment, it did result in a reduction, but we would have come down to where we are now anyway over time." The amendment eliminated the grid. Schneider said he is "very satisfied" with the new pricing. "I think we're at the right level for a company with our size and our risk profile," he added.
Wachovia Securities, Bear Stearns and Fleet Securities lead the facility. "We're very sensitive to the economics of each of the banks in our bank group and we try to make sure with ancillary services, that it makes sense for each of the banks in our bank group to participate," Schneider said. There were murmurs from some institutional clients that pricing was an issue (LMW, 2/2). But Schneider said the response was favorable, with the loan only going out to existing lenders. DRS provides products and services to defense, government intelligence and commercial customers.