Market timing and secondary market demand were key factors in Iron Mountain's $250 million refinancing, enabling the record management company to trim the spread by 1/2% on a new $250 million "B" loan. Iron Mountain was closely watching the bank and bond markets, and the pricing was inconsistent with the trading on the name, remarked Iron Mountain treasurer John Lawrence. The old paper, which matured in 2006 and carried a LIBOR plus 23/ 4% spread, was trading at 101 1/2, he said. "We did two major bond financings last year and these were well oversubscribed," he added. There is a lot of overlap between the bond and bank investors and looking at what is going on in the "B" market we expected good appetite," Lawrence noted.
The $250 million J.P. Morgan-led "B" loan will mature in 2008 and is priced at LIBOR plus 21/ 4%. With a $100 million drawdown from a $400 million revolver the old facility is being taken out by the new loan, which matures in 2008. Iron Mountain is one of a handful of successful credits in the market taking advantage of investor demand to cut pricing (LMW, 4/8).
Not all credits are able to execute a price cut in what is still a tough market though. "Iron Mountain has very stable, strong, predictable cash-flow. With 125,000 account relationships, there is a diversified customer base and relationships grow 5% every year without having to sell new accounts. This is a safe-harbor credit," Lawrence commented. The ratings agencies assigned Ba3 and BB- ratings, citing these factors as well as the low business risk in the core domestic storage business. "Chase was the lead bank on the deal. They have been the agent bank for years," Lawrence noted. "They have tremendous strength in the lending market, they put the transaction together and have done it repeatedly over the years," he added.