Titan is making the distinction between its credit bank and its investment bank by choosing Wachovia Securities to lead its new $485 million credit rather than incumbent Credit Suisse First Boston, according to Mark Sopp, senior v.p. and cfo. The company wanted to make a clear distinction between its credit bank and its investment bank to avoid a potential or perceived conflict of interest and was seeking assured objectivity from its banks in relation to future financing needs, explained Sopp. CSFB will remain in Titan's relationship bank group, but will be involved primarily with the company's investment banking business.
Sopp explained that having separate banks for commercial and investment banking services allows it to choose financing options rather than be steered by a single provider to a bond deal, for example, if a mere amendment to a bank facility will suffice. Bank of Nova Scotia and Comerica Bank are co-syndication agents, and Branch Banking Trust and Toronto Dominion are co-documentation agents. Out of the 68 banks and institutions participating in the facility, 50 are new relationships for Titan. "There are many new institutions participating," said Sopp.
There are two reasons for the new facility. The company has grown substantially since its old credit closed in February 2000 and the provisions in the new credit agreement are more in line with the company's business model. These provisions include an increased investment basket, sale-leaseback transactions and letters of credit. Another critical feature of the new facility is the exclusion of SureBeam's stock as collateral backing the loan so that there is no interference with Titan's plans to spin off the company. Sopp said that the bank group from its old facility wanted a sizable amendment fee for the spin-off, but it only cost a marginal amount more to get the new facility in place.
The new credit comprises a $135 million, six-year revolver and a $350 million, seven-year term loan "B". Both tranches are priced against a leveraged-based grid with pricing set to LIBOR plus 21/ 4% on the revolver and LIBOR plus 23/ 4% on the 'B' at the company's current debt-to-EBITDA ratio of 2.5 to 3.0 times.