Watts Industries refinanced its existing revolver a year before its March 2003 maturity to seize the opportunity to consolidate its outstanding U.S. and European loans and address near-term maturities. A E29 million piece of an ABN Amro and Intesa Bci-led E41.5 million multi-tranche credit was set to mature in March of this year. That debt and a FleetBoston Financial-led $100 million revolver helped fund the company's acquisitions. The new credit rolls both the $100 million domestic revolver and the E41.5 million European credit facility into one $150 million, three-year revolver led again by Fleet. "We felt it was easier to have one much larger line of credit," said William McCartney, cfo of Watts, adding, "I also have financing needs that needed to be addressed in Europe so I tied those in with the revolver."
The European banks did not participate in the syndicate, which includes J.P. Morgan, Mellon Bank, Wachovia Bank, Bank of American, Brown Brothers Harriman, and Citizens Bank. Fleet, as Watts' relationship bank since it was Bank of Boston, was approached directly for the credit. "We were satisfied with their good service levels and the professional advice they offered us," McCartney said, adding that the Massachusetts-based company was first drawn to BankBoston because it of its home presence.
The new credit, which closed on Feb. 27, offers pricing of LIBOR plus 1%, compared to the LIBOR plus 18.5 basis points on the $100 million revolver and the EURIBOR plus 75 basis points on the E41.5 million line. McCartney links the pricing on the deal to Watts' performance and long, stable credit history. "[Watts] is investment grade and our results have been fairly good compared to a lot of other manufacturing companies over the past two years who are trying to weather this economy," he said.
The revolver will be used primarily to fund Watt's acquisitions, although McCartney could not disclose its future plans. A revolver is attractive to Watts because it offers the flexibility to control debt and interest payments with cash balances and at the same time offers the company the instant access to capital that it needs, said McCartney.