Dresser plans to pay down approximately $23 million of its eight-year, $455 million "B" term loan by the end of the month. The company will pay down $30 million as part of a debt reduction strategy to combat the economic slump, said James Nattier, cfo. "Currently, in the depressed economic environment our focus is on repaying debt," Nattier noted. The reduction will be funded with cash on the company's balance sheet. The "B" piece has no call protection.
The Addison, Texas-based company's original credit was secured in April 2001. At that time, it comprised a six-year, $100 million revolver; a six-year, E100 million "A" term loan; a six-year, $165 million "A" term loan; in addition to the "B" piece. The company has, however, completely paid down both its euro and U.S. dollar denominated "A" tranches. The majority was paid down in March and the remaining amount was taken out in June, noted Nattier.
The revolver is now priced at LIBOR plus 3% and the "B" is priced at LIBOR plus 3 1/2%. The bid/ask spread 100 ¼-3/4, according to LoanX. Although the pricing is linked to a leveraged-based grid, with the company's currently debt-to-EBIDTA ratio clocking in at around 4.5 times, Nattier said the planned reduction in debt will not impact Dresser's borrowing costs.
Morgan Stanley is the lead on the deal. The bank was chosen for the credit because it offered the most competitive overall financing proposal, commented Nattier. Dresser produces flow control, measurement and power systems, which are sold primarily to customers in energy-related industries.