Stryker Corporation refinanced its existing Bank of America led $1.65 billion credit line, signed in Dec. 1998, to take advantage of its new credit rating and investment grade-status. The new deal will enable the company to save roughly $9 million in interest expense through a reduction and re-structuring of the credit. "The dramatic improvement in credit rating, or credit profile, is what allowed Stryker to access the credit markets now to refinance the debt on much more favorable terms," said Christopher Homrich, v.p. and treasurer of Stryker. "I think the transaction was successful. We were very satisfied with the overall pricing," he added. The new deal gives the company more operational flexibility as financial convenants on the deal are more lenient.
The Moody's Investors Service rating upgrade from Ba2 to Baa2, has moved the company up from leveraged to investment grade, allowing the company to shed the more expensive term loan piece of its old credit in exchange for a less costly revolver. The original deal, tied to a grid based on corporate leverage ratios, was broken down into a $500 million revolver and a $575 million term loan "A" priced at LIBOR plus 11/ 4%, a $290 million term loan "B" priced at LIBOR plus 21/ 2%, and a $285 million term loan "C" priced at LIBOR plus 23/ 4%. The new deal, includes a $250 million, 364-day revolver and a $750 million, five-year revolver with a spread of 50 basis points over LIBOR for both tranches. The new credit is linked to a grid based on corporate credit ratings. Stryker was given the Ba2 credit rating after taking on debt associated with its Howmedica acquisition in 1998, said Homrich. However he explained, "Over the last three years we have outperformed market expectations."
The syndicate, comprised of 24 banks, is led once again by B of A. "They have the largest footprint with Stryker globally," Homrich commented. "They also have the best capabilities among any of my relationship banks in the syndicated market." The interest savings will be used for general working capital purposes.