American Standard has completed a new $1.3 billion revolver led by J.P. Morgan after seeing the facility oversubscribed during syndication. Scott Massengill, v.p., and treasurer, said relationships and forward momentum propelled the deal in spite of a tough market. "The bank group liked the positive direction of the company and significant commitments were made by relationship banks," he said. "The over-subscription means American Standard pays less in upfront fees and lenders in the top tiers get to reduce their level of commitments." There was no need to upsize the facility, as the manufacturer is looking to reduce debt in the coming years, explained Massengill.
The credit replaces a five-year, $1.65 billion loan led by Chase Manhattan Bank, set to mature in 2002, Massengill added, noting the aim is to have total debt at $1.7 billion-- compared to the current $2.4 billion-- by 2003. This is why a larger facility was not sought, he noted.
Pricing increased, even though the credit quality of the company has improved, but "clearly pricing in the bank market has changed since 1997," Massengill said. "The number of banks in the credit facility was cut in half this time around, another indication of change in the bank market. We view a smaller bank group favorably since most banks are looking for ancillary business, and we have only so much business to award." Pricing on the fully drawn credit is now LIBOR plus 11/ 4% compared to LIBOR plus 3/4%. The low interest-rate environment is reducing the interest payments though, he noted.