K+S AG, Europe’s largest potash maker, is seeking a 1 billion-euro ($1.3 billion) loan to refinance existing debt at a lower rate of interest, according to two people with knowledge of the matter.
The five-year credit line has an initial interest margin of 40 basis points, or 0.4 percentage points, more than the euro interbank offered rate, said the people, who asked not to be identified because the terms are private. That compares with about 100 basis points K+S pays on its current credit line due July 2015, they said.
BNP Paribas SA, Royal Bank of Scotland Group Plc, Societe Generale SA and UniCredit SpA are arranging the deal, which they started marketing to other lenders yesterday, said the people. The loan includes two one-year extension options that would need to be approved by lenders.
Michael Wudonig, a spokesman for Kassel, Germany-based K+S, declined to comment on the financing in an e-mail.
The German company has proposed the same rate of interest as French electrical equipment-maker Schneider Electric SA, which is also seeking a 1 billion-euro five-year loan, according to data compiled by Bloomberg. Deutsche Bank AG and Societe Generale are arranging that debt.
K+S’s new deal would replace a five-year 800 million-euro loan raised July 2010 that pays initial interest of about 100 basis points, said the people. Commerzbank AG, Societe Generale and UniCredit arranged the existing facility, Bloomberg data show.
K+S is rated Baa2 by Moody’s Investors Service, two levels above junk, and one step higher at BBB+ by Standard & Poor’s.
The interest margin on the revolving credit facility, where money repaid can be borrowed again, is linked to the company’s credit rating, the people said. Potash is a form of potassium used to strengthen plant roots and protect against drought.