Metals USA tapped its relationship bank, Bank of America, to lead a $350 million debtor-in-possession financing facility last month after it filed voluntarily for Chapter 11 protection in November. The facility is set to mature in June 2003, allowing for two three-month extensions and it is priced at LIBOR plus 3/4 %. "It allows us to operate in a fairly normal way during the bankruptcy process," said Terry Freeman, v.p., chief accounting officer and treasurer, said of the DIP.
The company began its relationship with B of A in March 2001 when, anticipating a softening economy, it opted for an asset-based loan rather than a cash-flow deal. Up to that point BANK ONE was the lead on its credits, but B of A took the lead because "they were a very large player in the asset lending world," explained Freeman. The March 2001 credit facility comprised a $350 million revolver secured by the company's receivables, inventories, property and equipment, and a $100 million term loan secured by accounts receivable. Both were priced at LIBOR plus 1 1/4 % and were set to mature in March 2004. Pricing was similar to its previous deal, but the asset-based structure did not require strict financial covenants, allowing the company more operational flexibility. PNC Bank also co-led the facility.
Last November, a violation of the tangible net worth covenant, due to the operating losses associated with a weakening economy, caused the default that ultimately ended in the company filing for bankruptcy.