Steel Dynamics picked J.P. Morgan and Morgan Stanley to lead a $550 million refinancing that includes $350 million of bank debt, after previous lead Mellon Financial sold a portion of its loan portfolio, including the old Steel Dynamics deal. Tracy Shellabarger, v.p. and cfo of Fort Wayne, Ind.-based Steel Dynamics, said, "Mellon sold loan portfolios to GE Capital a couple of months ago." With that relationship gone, the company shopped elsewhere.
Shellabarger declined comment on whether GE bid to lead the credit after Steel Dynamics started shopping elsewhere or why J.P. Morgan and Morgan Stanley were selected as replacements. One banker speculated the GE team is more interested in building portfolios of loans rather than leading and syndicating deals. The $350 million bank debt is a mixture of revolver and term loans, while there is also a proposed issuance of $200 million in notes due 2009. A GE spokeswoman did not return calls.
Mellon sold $2.6 billion in loans to middle-market and large corporate companies to GE in December 2001. This followed the divestiture of Mellon's mid-to-large and small ticket leasing businesses and asset-based lending business. An official at Mellon declined to comment, but a banker familiar with the bank's portfolio sale said Mellon's break from Steel Dynamics was not a move away from the steel sector. Rather, it is a yield-driven move where fee-based business drives lending.
The bank meeting was held last Tuesday, Shellabarger said, with pricing in the LIBOR plus 31/ 4% range. The new debt is designed to give a more balanced capital structure to Steel Dynamics, Shellabarger added. The old facilities comprised $450 million in loans and were arranged in 1997. The approaching maturity of the debt was one of the factors in the refinance, he noted, declining further comment on the exact composition.