Bank loan participants join nation in remembering Sept. 11; Clean Harbors closes loan

By Sara Rosenberg

New York, Sept. 11 - Bank loan market activity took the sidelines as the nation focused its attention on remembering the tragic events that occurred exactly one year ago today. New deals were not launched in the primary and secondary trading was relatively non-existent in an attempt to pay tribute to those who were affected by the terrorist attacks and to allow individuals to partake in various memorial ceremonies.

"It's a real slow day," a fund manger said. "There are a lot of events going on in New York [and in other cities] and a lot of people have probably taken the day off. My phone has not been ringing. I don't foresee a lot of things happening today."

In follow-up news, Clean Harbors Inc. closed on a $235 million credit facility (BB) in conjunction with the completion of its acquisition of Safety-Kleen Corp.'s Chemical Services Division. The bank loan consists of a $100 million three-year revolver with an interest rate of Libor plus 300 basis points from Congress Financial, a $100 million three-year non-amortizing senior term loan with an interest rate of Libor plus 725 basis points and a $35 million non-amortizing five-year subordinated term loan with an annual interest rate of 22%.

The 425 basis point differential between the interest rates of the revolver compared to the senior term loan is due to varying security packages. "The revolver is primarily secured by receivables. It's the most liquid collateral," a company spokesman previously told Prospect News. The term loan is secured by a less liquid collateral package that includes fixed and certain other assets and a second priority lien on accounts receivable.

The company has chosen to use bank debt to finance the acquisition because of "a lack of audit financial statements" for the Safety-Kleen division, the spokesman said. "We couldn't register the bonds and so forth, so it took us out of the market."

In addition, the company also used $25 million of convertible preferred stock to help finance the acquisition. The convertible stock pays a 6% dividend, is subject to a mandatory redemption after seven years and is convertible at the holder's option at $10.50 per share into approximately 20% of the currently outstanding primary shares of common stock.

Following the closing of the acquisition, Clean Harbor's anticipates finalizing commitments, which would increase the senior and subordinated financing by $20 million, a Wednesday news release said. With this additional financing, the senior note facility would increase to $115 million and the subordinated note facility would increase to $40 million. In total, the company expects total outstanding debt to be approximately $155 million and restricted cash to be $100 million. In March 2003, outstanding debt levels are expected to increase to approximately $200 million due to the issuance of additional letters of credit.

The senior term notes, the subordinated term notes and preferred stock were funded by a combination of Ableco Finance LLC, an affiliate of Cerberus Capital Management, LP and Oak Hill Securities Funds and other related accounts.

"Clean Harbors now clearly has the size, scope and strategic assets to be the leading hazardous waste services company in North America," said Alan S. McKim, chairman and chief executive officer, in the news release. "By leveraging our industry-leading IT systems and operational controls, we expect to improve service to our customers, increase productivity and achieve substantial cost synergies. Further, we are committed to achieving our EBIDTA goal of $115 million in 2003."

Clean Harbors is a Braintree, Mass. provider of environmental and waste management services

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