Dearborn, Mich.-based Rouge Industries closed a $250 million revolving credit facility with lead arranger Congress Financial Corporation, opting out of its historic relationship with BANK ONE over pricing issues. Gary Latendresse, cfo, said the company chose a new lead arranger in response to Congress presenting the most favorable bid to the company. "We looked at all factors--fees, interest rates, covenants, and reporting and overall Congress was the strongest in these categories," he said. In describing a tough loan market for the U.S. steel industry, Latendresse said, "If there are any modifications on a loan, given the opportunity they're upping interest, covenants and security requirements because the steel industry is not in good financial shape," he said.
Congress underwrote the loan at the beginning of this month and is still out in the market syndicating the credit. Calls to Congress were not returned. The company is adding a $100 million piece underwritten by Congress to an existing $150 million credit it had with BANK ONE to create a separate $250 million credit. Pricing on the new credit is LIBOR plus 3% on the three-year facility.
Latendresse explained that the company experienced a big hit in pricing a year ago when it increased its $100 million facility with BANK ONE to $150 million. The company's current loan is tied to asset-based pricing. Latendresse said the new credit would be used for general corporate purposes.