W.R. Grace Said to Cut Rate on $900 Million Bankruptcy Exit Loan

W.R. Grace & Co. cut the rate it is paying on a $900 million loan to support its emergence from bankruptcy, according to a person with knowledge of the transaction.

The company will pay interest at 2.25 percentage points more than the London interbank offered rate on the debt that includes a $200 million portion denominated in euros, compared with 2.5 percentage points more than the lending benchmark initially proposed, said the person, who asked not to be identified without authorization to speak publicly. The loans will have a 0.75 percent minimum on Libor.

Grace, which filed for Chapter 11 protection in 2001 to deal with 100,000 asbestos-related injury claims, has said it anticipates emerging from bankruptcy on Jan. 31. Last month, the Columbia, Maryland-based company said it would pay lenders $129 million, plus interest from Dec. 31, in addition to distributions under its reorganization plan, according to a regulatory filing.

The exit financing includes a $400 million revolving-credit facility and a $250 million delayed-draw term loan. Goldman Sachs Group Inc., Deutsche Bank AG, Bank of America Corp. and HSBC Holdings Plc are arranging the term loan, which is rated BBB- by Standard & Poor’s and Ba2 by Moody’s Investors Service.

Grace is expected to exit bankruptcy with a debt-to-earnings ratio of 1.5, according to a Dec. 24 report by Goldman Sachs analysts led by Brian Maguire.

Asbestos Claims

Under the reorganization plan approved in January 2011, Grace will fund a trust to compensate people with lung diseases related to asbestos, once used in products including car brakes and fireproof insulation. Grace was the last of a wave of multibillion-dollar bankruptcies filed in 2000 and 2001 by companies trying to limit their financial exposure to hundreds of thousands of asbestos suits.

Proceeds of the term facilities will be used to fully pay outstanding claims, while the revolving lines of credit will probably remain undrawn and will be available to support operating needs, according to a court filing.

In a revolving line of credit, money can be borrowed again once it’s repaid; in a term loan it can’t.

The case is In re W.R. Grace & Co., 01-bk-01139, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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