Magazine article American Banker

Borg-Warner Picks Lead Banks

Magazine article American Banker

Borg-Warner Picks Lead Banks

Article excerpt

Borg-Warner Corp. has informally selected lead banks for two separate loans totaling $600 million, sources said.

Chemical Bank and Bank of Nova Scotia have been tapped to lead a $400 million credit package, while Bankers Trust Co. is said to have beaten out other bidders to lead a $200 million deal.

Arrangements are also being made for bank financing totaling $250 million or more in letters of credit and an asset securitization. It wasn't immediately clear whether mandates had been awarded, even informally.

Company Being Divided

The new credits are part of a broad recapitalization of Chicago-based Borg-Warner, involving, among other things, an initial public offering of stock, the spinoff of the company's automotive unit to present private shareholders, and the refinancing of existing bank debt.

The subject of a $3.8 billion leveraged buyout in 1987, Borg will emerge from the recapitalization with one business - protective services - under such trademarks as Wells Fargo and Pony Express.

BW-Automotive will be spun off as a separately capitalized entity, in which Borg-Warner will have no equity interest.

Of the two, BW-Automotive will have the better-looking balance sheet. Its cash flow will exceed debt costs by more than three times, compared to about two times for Borg-Warner after the recapitalization is completed.

Widely Different Deals

The profiles of the two credits are so different that - at least in theory - the deals shouldn't compete against each other when they come to market early next month, bankers said. …

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