Allison Transmission Inc., the locally based maker of transmissions for trucks, buses and the military, set the interest rate it will pay on a $500 million term loan the company is seeking to refinance debt, according to a person with knowledge of the transaction.
The seven-year debt will pay interest at 3.25 percentage points more than the London interbank offered rate, said the person, who asked not to be identified because the terms are private.
Allison Transmission is proposing to sell the loan at 99 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.
Proceeds will be used to refinance a portion of the company’s existing debt, said the person.
Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Deutsche Bank AG and Barclays are arranging the financing for the company, and commitments are due by noon on Aug. 14, the person said.
Melissa Sauer, a spokeswoman for Allison Transmission, declined to comment.