CF to pay at least 6% on $1.3 billion Terra takeover financing package

Deerfield-based CF Industries Holdings Inc. will pay at least 6 percent in interest on the $1.3 billion bank facility it has arranged to finance its hostile takeover of Terra Industries Inc.

Morgan Stanley is offering to provide a $1 billion term loan and a $300 million revolving credit line with interest rates 3.75 percentage points more than the London interbank offered rate, according to a commitment letter CF Industries attached today to a regulatory filing. Both five-year loans will have Libor floors of 2.25 percent, according to the letter.

Along with a $1.2 billion bridge loan, the financing is the biggest leveraged loan commitment by a single bank this year. The $2.5 billion package is second only to the $3.2 billion arranged by six banks including Morgan Stanley to back Warner Chilcott Plc's acquisition of Procter & Gamble Co.'s prescription-drug unit, according to data compiled by Bloomberg and Standard & Poor's Leveraged Commentary and Data.

The one-year bridge loan has an interest rate 5 percentage points more than Libor, with a 2.5 percent floor, according to the commitment letter. If the loan is not repaid in full within 30 days after the closing date, the margin will increase by 50 basis points at the end of each 30-day period. Should CF Industries not repay the bridge loan at the end of one year, the debt will convert to a seven-year term loan.

Three-month Libor, a borrowing benchmark, was set at 27.81 basis points today, a record low. A basis point is 0.01 percentage point. Leveraged loans are those rated below Baa3 by Moody's Investors Service and less than BBB- by S&P.