Banc of America Securities and FleetBoston Financial are rounding up banks for a $225 million credit for Schuler Homes. The two leads are looking for an additional five to six lenders to participate in the best-efforts syndication, which was launched at the end of June. The credit could increase to $400 million if more lenders step in, said Thomas Connelly, senior v.p. and cfo. Banc of America and Fleet will hold $75 million each while First Hawaiian Bank and California Bank and Trust have stepped in for $50 million and $25 million, respectively.
The three-year unsecured loan is priced at LIBOR plus 2% until Dec. 31, Connelly said. After that, pricing is based on a grid tied to the company's leverage levels and ranges from LIBOR plus 13/ 4% to 21/ 2%. The banks retain the option to roll over the loan each year.
Schuler decided to come to market now because of attractive available interest rates, he said. The company has a long-standing relationship with both institutions and did not solicit any other proposals. Schuler has already borrowed $50 million on the line, which it repaid with cash it received from home closings.
The El Segundo, Calif., -based home builder will use the loan to meet its seasonal inventory requirements, Connelly said. Schuler expects to spend $1.5 billion to build more than 5,000 homes this year. The company completed a merger with Western Pacific Housing in April, after which it paid down both company's lines of credit to reduce its short term bank debt.
Schuler's previous $200 million line was provided by Banc of America Securities, Fleet and First Hawaiian Bank. The line was priced on a grid tied to leverage and ranged from LIBOR plus 160-200 basis points. Western Pacific's $220 million line, provided by Fleet, was also tied to leverage and ranged from LIBOR plus 21/ 4% to 21/ 2%.