Varel seeks $250 million credit facility, $75 million mezzanine debt

By Sara Rosenberg

New York, Dec. 4 - Varel International Energy Funding Corp. is in market with a $250 million credit facility and $75 million of five-year mezzanine financing, according to market sources.

Credit Suisse Securities (USA) LLC is the lead bank on the deal that launched with a call on Nov. 28.

The credit facility consists of a $20 million four-year revolver and a $230 million 4 1/2-year first-lien term loan.

Price talk on the term loan is Libor plus 775 basis points with a 1.5% Libor floor and an original issue discount of 98.

The term loan is non-callable for one year, then at 103 in year two, 102, in year three and 101 in year four.

Amortization on the term loan is 2% in year one, 4½% in year two, 4¾% in year three and 6¼% in year four.

Meanwhile, the mezzanine debt is talked at 11% plus 1.5% PIK and is being offered at an original issue discount of 98, the source continued.

The mezzanine financing is non-callable for two years, then at 103 in year three, 102 in year four and 101 in year five.

Proceeds will be used to refinance existing debt.

Varel is a Carrollton, Texas-based manufacturer of drill bits for oil and gas and mining.

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