Nalco Holding Co., (NLC) announced that its wholly-owned subsidiary, Nalco Co., is calling for redemption its EUR 200 million 73/4% senior notes due in November of 2011. The redemption is being done at par value using funds from a new incremental term loan and cash.
To obtain new secured financing, the company issued a term loan C with a floating rate spread of 175 basis points over LIBOR and a 9% closing fee to the lenders. At current LIBOR rates, this equates to a yield to maturity of 3.6%. Based on current LIBOR and foreign exchange rates, Nalco Co.'s entry into the Term Loan C and use of the proceeds to redeem its Euro-denominated Senior notes due 2011 are expected to reduce Nalco's interest expense for 2010 by about $12 million from previous estimates.
Last week Nalco announced the redemption of the entire outstanding amount of its U.S. dollar-denominated senior notes due in 2011. Upon the completion of both redemptions, Nalco Co.'s senior notes due in 2011 will be paid off. Nalco expects the redemptions to reduce 2010 interest expense by a total of approximately $27 million from previous estimates.
As announced earlier, a remaining term loan B of $167 million maturing in November 2010 is expected to be retired on schedule through internally generated cash flow and other resources.
The new $300 million term loan C was provided for in a recently arranged set of amendments to Nalco's credit agreements. The incremental term loan will mature in May 2016, the same maturity as the company's existing term loan issued in May of this year.
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