Bank of America's pull back from corporate lending is starting to be felt in the market, as treasurers look for new leads and competitors step up for the vacated roles. J.P. Morgan Chase landed the lead spot onIntegrated Electrical Services' $150 million revolver after B of A informed the company that its lending relationship would be one of those dissolved as the bank sought to withdraw approximately $20 billion of its position in the loan market. Neil DePascal, v.p., treasurer and chief accounting officer for Integrated, said he was not aware the bank was curtailing its lending relationships until the company went to renew its facility in March. "When B of A withdrew, it allowed the others to grab the business," he said.
A spokeswoman for B of A confirmed that $20 billion is being withdrawn from loans as a result of credit quality issues. She declined comment on how far down the unwinding process B of A is or a timeframe for completion. B of A is leading a more disciplined approach to credit, she added.
DePascal said the original credit was a $175 million deal led by NationsBanc Montgomery Securities before it merged with Bank of America. The deal was set to expire and DePascal said he had every intention of staying with B of A until bank officials said they had no intention of staying with the company. Existing lenders were approached, and as much as possible the same group was held together, he added. Bank of Nova Scotia, Credit Lyonnais, TD Securities and Bank of Scotland were among the other banks on the deal.
The new three-year loan was initially meant to be a $100 million revolver and a $50 million term loan, but following the successful closing of $125 million in 9 3/8 % senior notes due 2009, the $50 million reverted to a revolver. DePascal commented, "The syndicated loan market is pretty choppy right now, and the only way to get a deal done is through homework and keeping the group together. Essentially, this deal was done through relationships."
Pricing on the revolver is LIBOR plus 21/4 %, which is maybe 1/4% higher than the last loan rate, due to higher interest rates, DePascal said. The revolver was downsized from $175 million, because Integrated never drew down more than $125 million on the last one, but the company wanted the capability of $150 million, DePascal added.