MedSource Technologies, a Minneapolis-based provider of engineering and manufacturing services to the medical-device industry, completed a debt overhaul through an initial public offering, slashing annual interest costs by 75%. MedSource had $86 million of debt, of which $66 million was senior and $20 million was subordinated debt, said Paul Scolardi, corporate controller. While completing an IPO, which paid down debt accumulated through acquisitions, MedSource also put in place the new facilities, he added. Interest expense has gone from about $10 million per year to $2.5 million.
The new five-year, $85 million credit comprises a $40 million term loan, a $25 million revolver and a $20 million delayed draw acquisition-line term loan. Only the $40 million line is drawn, Scolardi said. He declined to comment on what the previous pricing on the loan was and the new spreads. According to bankers, pricing on the three tranches is LIBOR plus 21/ 2%.
MedSource approached the banks when it was looking for the new line, Scolardi commented. Wachovia Securities, U.S. Bank and Harris Nesbitt were chosen as administrative agent, syndication agent and documentation agents respectively, he noted, citing their strength as factors in the decision. He declined to comment on the other banks considered or which bank led the previous line. M&I Bank, Bear Stearns and Morgan Stanley were managing agents for the credit. Morgan Stanley led the IPO, with Bear and Wachovia as co-agents raising $100.1 million, but MedSource had intended to raise $120 million.