Schuler Homes has expanded its revolving credit facility from $225 million to $350 million in order to bring more banks into the syndicate and generate greater liquidity. "The existing $225 million facility that closed in June had four banks," said Thomas Connelly, senior v.p. and cfo. "We felt like bringing in additional exposure to more lenders." Bank of America and FleetBoston Financial led the $225 million credit, with First Hawaiian Bank the administration agent and California Bank & Trust a participant. Eight additional lenders came in on the expanded credit including BANK ONE, Key Bank and Comerica Bank.
The closing of the credit facility was complemented with a $250 million senior notes offering and a $150 million senior subordinated notes offering, both led by UBS Warburg and B of A. Prior to the $225 million revolver, Schuler had two different bank lines, explained Connelly. These amounted to roughly $400 million, with a $200 million credit led by B of A, Fleet and First Hawaiian Bank. Pricing was tied to a leverage-based grid and ranged from LIBOR plus 160-200 basis points. Schuler completed a merger with Western Pacific Housing in April, and Western Pacific had a line provided by Fleet carrying pricing ranging from 21/ 4% to 21/ 2%. The note offering and new facilities refinance the old lines and expand liquidity, stated Connelly. Furthermore, the mixture of notes and bank debt provides a better balance of short-term and medium-term debt, he added.
Connelly said he did not believe there was any pressure by the banks lending the money to play a part in the notes offering. "They express the preference to do as much business as possible, but they are not heavy-handed about it," he noted. Pricing on the new three-year credit is LIBOR plus 13/ 4% to 21/ 2% over LIBOR based on leverage. The company has a long-standing relationship with both Fleet and B of A and so did not solicit any other proposals, he added.