CoBank Agents HickoryTech Debt Refinancing
HickoryTech, doing business as Enventis, announced the closing of its debt refinancing agreement for an aggregate credit facility of $165 million. Participants of the new credit facilities include: CoBank ACB as administrative agent, lead arranger, bookrunner and a lender; Union Bank as co-syndication agent and lender, Sun Trust Bank as co-syndication agent and lender, Associated Bank as lender and four Farm Credit System Institutions as lenders.
The amended credit facility offers HickoryTech access to extended financing through 2019 to deploy capital in pursuit of its strategic growth initiatives.
“We are very pleased with the terms and cost of this refinancing, which will replace our existing debt and provide additional capacity and flexibility to allow us to continue our growth strategy over the next several years,” said David Christensen, senior vice president and chief financial officer. “This refinancing demonstrates the continued confidence our lenders have in our business model and further strengthens our long-term capital structure.”
The debt refinancing is in the form of an amendment to the company’s existing agreements. It includes the issuance of $135.3 million in secured term loans and a $30 million secured revolving credit facility, which has no outstanding debt or usage at this time. The term loans are structured in a Term Loan B facility, and are combined in the same credit agreement with the revolving credit facility.
Borrowings under the new credit agreement will bear interest at the company’s election based on LIBOR or a base rate plus an applicable margin related to the company’s leverage ratio. At the company’s current leverage ratio, the applicable margin will be 2.75 percent for LIBOR loans and there is no LIBOR floor amount.
The company is required to make quarterly amortization payments of $338,000 on the Term Loan B facility. The company has $135.3 million outstanding debt on October 30, 2013. All amounts outstanding on the revolving loan facility and Term Loan B facility will be due on Dec. 31, 2019.
This credit agreement includes new allowances for continued payment of HickoryTech dividends and common stock repurchases. The agreement also has been designed to provide incremental financing for business acquisitions that fit the company’s strategic plans.
As a result of the refinancing, HickoryTech will incur certain fees, as well as direct and incremental third-party costs of approximately $1.3 million to $1.4 million. These costs will largely be capitalized and amortized over the remaining six years of the agreements.
The credit facility is secured by substantially all HickoryTech assets. It includes financial covenants that require HickoryTech to maintain a leverage ratio of less than 3.5 to 1.0, with gradual declines in this ratio after 2014, and a debt service coverage ratio of greater than 2.5 to 1.0.
“With a current leverage ratio of approximately 2.9 times EBITDA, our relatively low levels of debt provide us with significant flexibility as we execute our business plan,” said Christensen. “We continue to see growth opportunities with our fiber and business services as we focus on generating sustainable free cash-flow and creating long-term value for our shareholders.”
HickoryTech Corporation is a communications provider serving business and residential customers in the upper Midwest and is doing business as Enventis.