Fairchild Semiconductor International has obtained a $480 million credit line, taking the opportunity to cut interest costs by retiring $300 million of 103/8% senior subordinated notes, said Pete Groth, Fairchild Semiconductor's treasurer. The company also turned to the bank loan market because of the ability to pre-pay the credit at any time, he said. Depending on the performance of its stock, Fairchild Semiconductor may issue equity to reduce its debt, he said. The loan will be a "bridge to a time when we de-lever," said Groth.
Deutsche Bank and FleetBoston Financial lead the credit. Credit Suisse First Boston, Morgan Stanley and Lehman Brothers are also involved with the transaction. Groth said the five firms are all relationship banks. CSFB led Fairchild Semiconductor's previous $300 million revolver, which was refinanced with the transaction. But the two new leads were chosen because Fleet had been involved with the company from a commercial banking side and Deutsche Bank had worked with the company to establish the most appropriate means for retiring the 103/8% notes.
The new credit for South Portland, Maine-based Fairchild Semiconductor comprises a $300 million, five-year "B" loan and a $180 million, four-year revolver. The "B" piece was priced at LIBOR plus 3% when syndication launched, but was flexed down to a spread of 23/4% after the tranche oversubscribed within a few days, noted Groth. The revolver is priced on a grid tied to senior leverage and currently carries a 21/2% spread over LIBOR. The former loan was priced on a grid tied to total leverage, which most recently carried a price of LIBOR plus 21/4%. This is not the first time that the company has tapped the "B" loan market. Groth explained that the company had a "B" piece put in place in conjunction with a leveraged buyout in 1997, but had since repaid the loan.