Pacer International has recently tapped the bank loan market for a new $330 million credit. This will enable the company to redeem $150 million of 113/4% senior subordinated notes that are set to expire in 2007, said Lawrence Yarberry, executive v.p. and cfo of Pacer. The timing of the deal was based on the current low interest-rate environment as well as the notes becoming callable on June 1, he added. The notes were originally issued in May 1999.
The new financing is led by Deutsche Bank, which also led the company's previous term loan. Yarberry said the bank was chosen in part because Pacer's equity sponsor, Apollo Management, has done multiple transactions with Deutsche Bank. Credit Suisse First Boston and Harris Trust and Savings Bank are co-documentation agents on the deal, while Bear Stearns and Credit Lyonnais joined the group as co-syndication agents.
The credit for the North American third-party logistics and freight transportation company comprises a $255 million, seven-year delayed draw term loan and a $75 million, six-year revolver. Up to $25 million on the revolver can be used for letters of credit. The term loan is priced at LIBOR plus 31/4% and the undrawn revolver has a commitment fee of about 1/2%. The delayed draw structure was chosen for the term loan so that the second draw date will correspond with the redemption date of the senior subordinated notes, which is July 10. The new facility also replaces a $91.2 million term loan.