Bank of America this week will launch syndication of a $400 million credit for Spokane, Wa.-based Potlatch Corporation. The deal will be split between a $200 million, three-year revolver priced at LIBOR plus 2 1/2% and a $200 million term loan "B"priced at LIBOR plus 3%. The company will also be doing a new senior sub note issue following launch of the bank deal. Gerald Zuehlke, cfo, said, unlike on the old credit, the company restructured the new facility to include a "B" tranche to reach institutional players. "It's another avenue to get capacity. The bank credit markets are tight, so it's harder to spread it out with the commercial banks so we are doing a "B" to gain more capacity," he said, explaining that the company has strategized according to current challenging market conditions regarding pro rata tranches and the decrease of available commercial lenders due to consolidation. The credit replaces a $250 million revolver and a $150 million bridge loan also led by B of A.
Zuehlke said that B of A may be splitting co-lead duties with another arranger, declining to name banks under consideration. He said the loan will be used for general corporate purposes. Market players and buysiders said the company's earnings suffered from its proximity to the California energy crisis as costs exceeded expectations in the first quarter. One buysider said if investors think the energy issue is company specific it could have a negative affect on the deal. Zuehlke noted the company is taking measures to mitigate energy expenditures and can produce some of its own energy. He noted energy has not impacted the new credit's structure as pricing is only marginally higher.