DRS Technologies chose First Union over Mellon Bank to lead its $240 million deal late last month to fund an acquisition of the Sensors and Electronics Business of the Boeing Company. The deal replaces a Mellon Bank-led $160 million credit, which was paid down. "We're doing an acquisition and needed the financing," said Rich Schneider, cfo and treasurer. "As the company grows, we needed to move on from Mellon, since we were unsure of their commitment [to larger financing]. First Union is aggressive," said Schneider. DRS is a defense technologies company based in Parsippany, N.J.
Schneider said the company is in an aggressive growth mode and its strategy has been to finance acquisitions through the use of debt and equity. "Debt seemed appropriate, then we'll reduce our debt with cash flow," he said, explaining the financing choice for this deal. "You can get debt done quicker and cheaper than any other type of financing." He explained that, even prior to the Sept. 11 attack, the defense industry had strong cash flow and got a strong reaction in the bank market. Schneider says the deal was "well oversubscribed," but that the company chose to stick with the intended amount.
The term loan and revolver are priced at LIBOR plus 31/ 2%. The company flexed down from LIBOR plus 31/ 4% because of the strong response during syndication, said Schneider, adding that pricing is less expensive than on the prior deal.