Bank of America pitched a $325 million credit last week for the second largest North American funeral home and cemetery operator, Alderwoods Group. The credit includes a five-year, $275 million "B" loan priced in the LIBOR plus 31/2-33/4% range and a five-year, $50 million revolver, according to Kenneth Sloan, executive v.p. and cfo. Sloan said B of A received positive verbal commitments to the deal both before and coming out of the July 30 meeting. Proceeds from the deal will be used to repay existing debt for Alderwoods and Rose Hills--the Cincinnati-based company's largest subsidiary.
The "B" loan will be used to retire Alderwoods' $195 million of 11% senior secured notes due 2007 and $80 million of Rose Hills' 91/2% senior subordinated notes due 2004. Alderwoods will use cash on hand to repay its existing revolver, which is drawn for $20 million. CIT Group/Business Credit and Fleet Capital Corp. are lenders on Alderwoods' existing $75 million revolver, which is priced in the LIBOR plus 21/2% range. Sloan said Alderwoods had to get rid of the asset-based revolver in order to free up more collateral for the debt issuance. He added that Alderwoods selected B of A to lead the new deal on account of the lender's industry expertise. "[B of A] did a very good job convincing us that the market window was very attractive at this time," he added.
An investor who was considering the credit thought the deal would syndicate smoothly. However, he said the fact that the company had just come out of bankruptcy last year "left a bad taste in [his] mouth." Alderwoods, formerly known as Loewen Group International, exited from bankruptcy at the beginning of 2002 after filing for Chapter 11 in June 1999. "We made no secret of the fact that we are still too highly levered," Sloan said, citing the company's priority to reduce debt. The company reported a long-term debt balance of $690.9 million as of last June 14. Moody's Investors Service cites that "although the company's debt levels are still relatively high, the ratings [at B1 for the credit] reflect recent years' improvement and the expectation that the company's leverage will continue to decline." B of A bankers declined to comment.