Constellation Brands let J.P. Morgan run with the ball after the bank pitched a repricing to the company. The original loan was led by J.P. Morgan, Citigroup and UBS , but J.P. Morgan spearheaded the re-pricing effort because it approached Constellation Brands with the idea. The company usually likes to reward the first bank that approaches it with the transaction lead, explained Thomas Roberts , the company's treasurer.
The repricing of Constellation Brands' "B" loan is commensurate with lower leverage and a reduction in the overall size of the loan, Roberts said. The company originally syndicated a $1.6 billion credit to back its acquisition of Australian wine producer BRL Hardy in April. Since the acquisition, Constellation Brands accumulated a lot of cash and completed an equity offering that netted about $261.4 million in proceeds. Constellation Brands leverage multiple subsequently shrank from around 4.5 times to about 3.5 times, so the company felt it was an appropriate time to reprice the "B" loan. The piece is now priced 50 basis points lower, taking the pricing down to 2% over LIBOR.
Constellation Brands also reduced the "B" loan by another $200 million to $500 million. The company already prepaid $100 million of the term loan "B" in August. The original credit comprised the $800 million "B" loan, a $400 million "A" piece and a $400 million revolver. The revolver includes an Australian dollar revolving sub-facility for up to A$10 million and a sub-facility for letters of credit up to $40 million. The revolver and "A" tranche were unchanged by the recent credit tweaks. But because pricing is linked to a leveraged-based grid, the pro rata now carries a spread of 1 1Ž 2% over LIBOR versus the original 2 1Ž 4% spread.
Only one European bank bowed out of the existing bank group. But Roberts said the bank did not rejoin primarily because it did not have enough time to get appropriate approvals. Roberts would not name the bank.