Walter Industries has completed a new $475 million credit facility that is tailored to allow the company to go forward with its plans to pare down and focus on its core businesses--home building, financing and U.S. pipe manufacturing. "We are trying to simplify the company. The facility has pre-approved divestitures," said Miles Dearden, Walter Industries' treasurer. "Lenders were able to get comfortable with our strategy." Depending on leverage levels and the business that the company sells, 50-100% of the proceeds from the divestitures will be applied to reducing the new bank debt.
The facility contains a $255 million, seven-year "B" loan. This is the first time Walter Industries has tapped the institutional loan market. The "B" piece amortizes at about 10% a year and is priced at LIBOR plus 41/4%. The credit also includes a $250 million, five-year revolver that carries a spread of LIBOR plus 31/2%. The company's previous facility comprised a $350 million revolver and $450 million "A" term loan. Both tranches were priced at LIBOR plus 5/8%. Dearden commented that the increased pricing for the new deal was mostly due to the change in credit environment since the former credit was completed in 1997. In addition, there is a small premium attached to new issuers in the "B" market, he said, explaining that investors had to take time to familiarize themselves with the company.
At the time of the refinancing, the "A" loan was $125 million due to a number of pay-downs, so there was not a significant change in the overall size of the credit. Bank of America and SunTrust Bank co-lead the deal. Dearden explained that Bank of America was the incumbent and SunTrust decided to double its commitment so the company chose to reward the two with the lead roles.