Dresser has refinanced an existing $382 million term loan "B" by putting in place a new $235 million "C" term loan, carving out a $125 million unsecured term loan, and paying down $25 million of the loan with cash. "The debt markets are very strong right now," explained Stewart Yee, director of corporate communications for Dresser. He said the company wanted to seize the opportunity to delever its secured term loan and reduce interest cost.
The Dallas-headquartered company is now expected to reap approximately $3 million in interest savings on an annual basis. The new unsecured term loan carries a LIBOR plus 31/2% spread, while its new term loan "C" is priced at LIBOR plus 21/2%. The former "B" loan was priced at LIBOR plus 33/4%. Dresser also has a $100 million revolver that remained untouched by the refinancing.
Despite the lower pricing, Yee noted that the company had the 100% participation of its "B" lenders. He also said the demand for the unsecured portion was strong. The tranche was ultimately increased from $100 million during syndication. "For those who were not restricted by their credit policies, there was quite a bit of interest," he added. Morgan Stanley and Credit Suisse First Boston led the recent refinancing. The two banks managed the former facility and are considered the company's relationship banks. "They've been with us since the leveraged buyout in April 2001," explained Yee.
In addition to reducing secured debt and lowering interest costs, Dresser was also able to reset its acquisition basket under the credit, which had become close to full after a number of smaller acquisitions over the last couple of years. The company now has the ability to pursue small-to-medium sized acquisitions, noted Yee.