FMC Corporation is in the market with a $300 million "B" term loan, its first ever trip to the institutional arena. The "B" tranche will combine with a $250 million revolver to complete a $550 million facility, central to the chemical company's refinancing plan announced last month. The combination of capacity and flexibility led FMC to access the institutional market, said Eric Norris, director of investor relations at FMC. The company's plans serve to solidify its liquidity position and pay off debt during a downturn in the chemical industry.
Pricing on the five-year term loan stands at LIBOR plus 31/ 4%, while the three-year revolver is priced at LIBOR plus 25/ 8% with a 50 basis point undrawn fee, according to a banker familiar with the deal. The new revolver will replace a previous $240 million revolver that is set to expire this December. Commitments on the facility, led by Banc of America Securities, Salomon Smith Barney and Wachovia Bank, are said to be due tomorrow with an expected closing on Oct. 15. Both banks and institutions are looking at the line with interest, the banker noted.
Ratings on the facility were issued at Ba1 by Moody's Investors Service and were affirmed at BBB- by Standard & Poor's. S&P did, however, push the notes off the investment-grade cliff to BB+. This makes FMC one of several "fallen angels" in the chemical industry this year. "The entire chemical industry is under pressure," said Kyle Loughlin, analyst at S&P. "FMC is a good company in a rough credit environment." He noted that S&P has downgraded 14 North American chemical companies and upgraded only one in the six months ending this past June.
Norris acknowledged that the ratings were consistent, but he noted that the downgrades did affect FMC's financial structure. FMC had to alter its plans in response to becoming a speculative-grade company, he said. "We are still at the top of the [high-yield] marketplace-- a good place to be," he added.
A banker familiar with the company said FMC did have an option to go to the banks for funding, unlike some lower-rated companies. But institutions offer more capacity to companies straddling the ratings fence. "You are going to see more and more crossover credits [in the institutional market] as companies enter BBB- levels," the banker added.