Lyondell Chemical has completed a mix of new financings in an effort to maintain the right balance between the bank loan and fixed-income markets, explained Karen Twitchell, treasurer. To accomplish this, the Houston-based company has reduced the size of its revolver from $500 million to $350 million and paid down $200 million of its $621 million "E" term loan. In exchange, it issued $278 million in 10-year notes and $115.92 million in common stock.
One of the most important features of the new financing package is the extension of Lyondell's revolver from next summer to June 30, 2005, Twitchell noted, adding that unfunded revolvers are an important source of liquidity. "A company can try to maintain a larger revolver, swimming upstream in a contracting bank market," she said. "Or you can face the reality, shrink the size and replace the [funds] with markets that are more robust." The company's revolver is priced at LIBOR plus 31/ 2%, although it has never been tapped. The term loan "E" is priced at LIBOR plus 43/ 8%.
The bank portion is led by Bank of America and J.P. Morgan. Credit Suisse First Boston, Citibank, Société Générale and UBS Warburg also play major roles on the company's credit. The six banks provide Lyondell with the majority of its financing, and all of them participated on the new equity deal, the bond deal or both, Twitchell noted.
Going forward, Lyondell does not anticipate any additional financing needs. "I think that we've reached a good balance," Twitchell said. "[But] one's view of good balance changes as the capital markets change."