Gorman-Rupp, a designer, manufacturer and international marketer of pumps and pump systems, completed a series of transactions to refinance its debt. These transactions are expected to reduce interest expense, and will extend and stagger the company’s debt maturities.
According to a related SEC filing, JPMorgan Chase Bank acted as administrative agent and collateral agent in connection with the transaction.
Gorman-Rupp upsized, amended and extended its existing senior term loan Facility to $370 million; amended and extended its existing $100 million revolving credit facility; issued $30 million of new 6.40% senior secured notes due 2031; and retired the existing $90 million unsecured subordinated credit facility.
Loans under the upsized, amended and extended restated senior secured credit agreement will initially accrue interest at an annual rate of adjusted term SOFR plus 2.25%, subject to an improved leverage based pricing grid. Amortization is payable quarterly on the term loans with the balance due on a new maturity date of May 31, 2029, which was extended from May 31, 2027.
The maturity date for the existing $100 million revolving credit facility, which remained at a zero balance following the refinancing, was similarly extended to May 31, 2029. The company privately placed $30 million aggregate principal amount of new senior secured notes which accrue interest at a fixed annual rate of 6.40%, with interest paid semi-annually and the principal due in full on May 31, 2031.
The proceeds from the upsized amended and restated senior secured credit agreement and the issuance of the new senior secured notes, as well as $10 million of cash on hand, were used to retire the company’s $90 million unsecured subordinated credit facility. The retired subordinated credit facility had been accruing interest at an annual rate of adjusted term SOFR plus 9.10% and was scheduled to mature on December 1, 2027.
The combined transactions are expected to reduce annual interest expense by approximately $7 million, subject to changes in the underlying interest rates. In the second quarter of 2024, the company will record a $1.8 million prepayment fee related to the early retirement of the unsecured subordinated credit facility and will expense approximately $1.3 million of transaction related fees. In addition, the company will record a non-cash charge of approximately $4.4 million to write-off unamortized previously deferred transaction fees related to both the unsecured subordinated credit facility and a portion of the existing senior term loan facility.
“Since the acquisition of Fill-Rite in May 2022, we have been focused on reducing the debt incurred to finance the acquisition and improving our leverage,” Jim Kerr, executive vice president and chief financial officer, said. “Our financial results and working capital management have improved our leverage and allowed us to retire the higher interest unsecured subordinated debt, replacing it with lower interest secured debt with a later maturity date. We believe the new structure provides flexibility and continues to position us to execute on our strategic initiatives and create value for our shareholders.”
