Bank of America and Credit Suisse First Boston are shopping a $450 million credit for Oxford Health Plans with the proceeds from the term loan funding a $208 million obligation on a $225 million settlement for a class action lawsuit. The new bank debt will also refinance $120 million of existing debt. The BB+ rated credit was launched to the market on April 1, a banker said. The $50 million, five-year revolver is priced at LIBOR plus 21/4% with a 50 basis point commitment fee, while the six-year, $400 million term loan has a spread of LIBOR plus 21/2-3/4%.
The settlement relates to a 1997 class action lawsuit brought following a decline in the price of the company's stock. The attractiveness of the interest-rate environment and the fact that Oxford Health had very little debt prior to this transaction are reasons why bank debt was chosen to finance the settlement, said Gary Frazier, senior v.p. of investor relations for the Trumbull, Conn.-based firm. He added that Oxford Health is considering a variety of options, including going to court, to claim $32.3 million from excess insurance carriers. He declined to provide a timeframe for this potential action.