Navistar gets commitment for $1.5 billion unsecured term loan, can be used to refinance notes

By Sara Rosenberg

New York, Feb. 9 - Navistar International Corp. has received a commitment for a $1.5 billion three-year senior unsecured term loan, according to an 8-K filed with the Securities and Exchange Commission Thursday.

Credit Suisse is the lead arranger on the deal, and J.P. Morgan Chase Bank, Banc of America Securities and Citigroup Global Markets are involved as well.

Borrowings under the term loan can carry an interest rate anywhere from Libor plus 450 to 700 basis points, based on ratings. The interest rate will increase by an additional 50 bps at the end of the 12-month period following the date of the first borrowing and by an additional 25 bps at the end of each subsequent six-month period.

Proceeds from the term loan could be used to refinance any or all of the company's outstanding notes that are allegedly in default as a result of a delay in filing its fiscal 2005 annual report. The filing delay is a result of ongoing discussions with outside auditors about a number of complex and technical accounting items.

Last week Navistar received, and is now disputing, notices from the trustee of its existing notes saying that the company has defaulted on its $190 million of 2½% senior convertible notes due 2007, $400 million of 9 3/8% senior notes due 2006, $250 million of 6¼% senior notes due 2012 and $400 million of 7½% senior notes due 2011.

All of the bond issues contain provisions that allow the company a cure period from receipt of the notice to file its annual report. The 2½% notes carry a 60-day cure period, while all other notes provide 30 days.

The unsecured term loan commitment expires on Aug. 7.

Navistar is a Warrenville, Ill.-based commercial truck and mid-range diesel engine producer.

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