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Bacardi sets $1B refinancing, shifts to U.S. model

Bacardi International Ltd is shifting to a U.S. pricing model as it looks to refinance an existing $1 billion revolver, allowing the company to pay lower initial interest rates, banking sources told Thomson Reuters LPC.

Bank of America Merrill Lynch, Barclays and BNP Paribas are leading the $1 billion, five-year refinancing revolver that launched this week. Pricing on the new facility is based on the company’s debt to Ebitda ratio. It opens at LIB+112.5 with a 12.5bp commitment fee.

The new credit will refinance a $1 billion revolver the company entered into in 2010. Pricing on that facility followed a European-based pricing model at LIB+75 undrawn with a 26.25bp commitment fee, according to sources.

In Europe the undrawn pricing is determined as a percentage of the drawn margin. In this case the undrawn pricing was 35 percent of the undrawn. In the U.S., however, pricing grids are determined by comparison with deals for companies in the same industry or ratings category or a smaller percentage of the drawn spread, banking sources explained.

Because the new facility is expected to remain undrawn, Bacardi will end up paying only the commitment fee on its loan, making the U.S. pricing model more attractive.

“The perception is that undrawn pricing is cheaper in the U.S. for the better-rated names,” a banker following the situation said.

Though the company’s bank group currently includes U.S., European and global banks, Barcadi’s relationship lending had been conducted mainly out of Europe, according to banking sources.

“Particularly in 2010, in Europe drawn spreads were tighter,” a banking source said. “But now, the commitment fee as a percentage of the draw margin is higher than in the U.S.”

The new pricing is on a grid tied to the company’s debt-to-Ebitda ratio ranging from LIB+150 to LIB+87.5 for a debt-to-Ebitda ratio of greater or equal to 3.5 times to under 1.5 times. The facility pays an undrawn fee ranging from 22.5bp to 8bp if it remains undrawn for the same debt-to-Ebitda ratio.

For some, the fact that European desks would sign on to a deal with U.S.-type terms is a sign of the times. The low new issue loan volume has created fertile ground for a borrower’s market where corporates dictate the lending terms.

“People are saying, ‘I might as well lend right now because I don’t know when I will get a chance to lend again,'” a banker said.

It is unlikely, though, that Bacardi’s option to shift terms would be available for other companies in the same BBB- ratings category. This comes as the market views Pembroke Bermuda-based Barcardi as a unique issuer with deep pockets and global banking relationships that is increasingly behaving like a U.S. borrower issuing both U.S. dollar-denominated bonds and commercial paper.

Bacardi is a global, privately-held, spirits company.

Source: Reuters