Bergen Brunswig dropped existing lender Wachovia Bank and selected GE Capital over a host of prospective lenders because the bank offered the most flexible long-term loan. "We can pay down the next day if we want to. With the other facility, if we borrowed $350 million, we were stuck with $350 million for two weeks. If we're flushed with cash suddenly, we can pay down and reduce interest expenses," said Linda Williams, assistant treasurer. Donna Doland, v.p. finance, added, "We can access it more often. The one we had before was not flexible, had access to it only once every two weeks." Doland posited that Wachovia may not have been interested in providing longer-term financing for the company because of post-acquisition difficulties. "We've bought some companies recently and have had a tough time integrating them," she said, declining to explain further. Wachovia officials did not return calls. The new $450 million deal was signed Dec. 20, and replaces Wachovia's $358 million, 364-day revolver.
Existing lenders Chase Manhattan Bank and FleetBoston Financial, as well as BANK ONE and Deutsche Bank, were among the banks Bergen passed on, according to Williams. The main factors involved fees and pricing, aside from borrowing flexibility. "With this line, we can reduce to $300 million if we feel we won't have to borrow as much over the next two or three months and not pay any non-use fee. With our $800 million Chase facility, we paid 25 basis points whether we used it or not," she explained. Williams said that Bergen did not choose Deutsche Bank as lead because of pricing. "Deutsche Bank wanted to do a different kind of transaction. It was a different kind of animal," she said, declining to elaborate. All bank officials declined to comment.
The new five-year facility is secured by accounts receivable and is funded by a GE Capital-sponsored cp conduit. The commercial paper is rated A1/P1. Pricing on the facility is based on a grid linked to Bergen's debt rating, and hovers near 70 basis points over LIBOR. Williams declined to provide the grid's range.