RailAmerica Closes New Credit Facility With Morgan Stanley, Others
RailAmerica, Inc. reported that it has closed on a new $585 million credit facility. The new seven-year term loan carries a rate of LIBOR plus 3%, with a 1% LIBOR floor, and was issued at a price of 99.5% of par value.
Morgan Stanley was the lead arranger on the term loan and along with Citigroup Global Markets, Deutsche Bank Securities and BMO Capital Markets acted as joint bookrunning manager. The lending group on the revolving credit facility includes Citibank, Morgan Stanley, BMO Harris Bank and Deutsche Bank.
The proceeds will be used to fund the company’s previously announced cash tender offer to purchase up to $444 million principal amount of its existing 9.25% senior secured notes due 2017, pay for transaction expenses and for general corporate purposes. In addition to the new term loan, the company will amend its existing revolving credit facility and increase its availability from $75 million to $100 million. The tender offer was managed by Citigroup Global Markets.
RailAmerica president and CEO John Giles said, “We are extremely pleased with the results of our refinancing. The success of the transaction validates the quality of RailAmerica’s assets and ability to generate substantial cash flow from a diverse portfolio of railroads. Our new term loan will allow us to achieve substantial savings in interest expense and marks another step in our continuing efforts to drive earnings growth. Based on the interest rate of our new term loan, together with our plans to redeem our remaining senior secured notes in June of this year, we expect the refinancing to result in an annual reduction in cash interest expense of approximately $24 million. In addition, the new financing and upsizing of our revolver will provide RailAmerica with ample liquidity to continue to actively execute our external growth initiatives.”
In connection with these transactions and the previously announced $74 million redemption of senior notes (completed January 5, 2012), the company will incur charges of approximately $50.3 million after tax in the first quarter of 2012. See the table at the end of the press release for updated estimates of 2012 interest expense and transaction charges.
RailAmerica, Inc. owns and operates short-line and regional freight railroads in North America, operating a portfolio of 43 individual railroads with approximately 7,400 miles of track in 27 U.S. states and three Canadian provinces.