Daily News: March 19, 2012

Mac-Gray Announces New, Expanded Credit Facility Led By BofA

Mac-Gray Corporation, a provider of laundry facilities management services to multi-family housing, announced a new and expanded senior secured credit facility, led by Bank of America. The new five-year agreement, which will mature in February 2017, consists solely of a revolving credit facility and increases Mac-Gray’s revolver capacity to $250 million from its current $130 million.

Approximately $100 million of revolver capacity will be used to pay off borrowings outstanding under Mac-Gray’s prior credit facility. The new agreement also gives Mac-Gray the option to establish an additional $100 million of revolving credit capability.

In conjunction with this new expanded credit facility, Mac-Gray will use $102.54 million of the revolver to redeem all of its $100 million in outstanding 7.625% senior notes due August 15, 2015. The new credit facility calls for Mac-Gray to pay an interest rate of LIBOR plus a spread of between 175.0 bps and 275.0 bps, depending on the Company’s leverage ratio. If there is not a significant change in short-term interest rates, Mac-Gray expects the cash payback on this bond redemption to be approximately nine months. As part of the redemption, and in addition to the $2.5 million early-payment premium, Mac-Gray will incur a one-time non-cash charge of approximately $1.2 million in its first-quarter 2012 results.

“Today marks an important new financial chapter for Mac-Gray,” said Michael J. Shea, Mac-Gray’s chief financial officer. “By taking advantage of the Company’s borrowing capacity and the current short-term interest rate environment, we have positioned the company to save approximately $5 million in annual interest expense until August 2015, when the bonds would have been due.

“With this new facility we are now well-positioned on two key elements of our long-term strategy – organic growth and select acquisitions. Despite the impact the recession and the unfavorable housing markets have had on our business during the past four years, we have used free cash flow to reduce our funded debt by more than $110 million during that time period. Given the strength of the company’s business model and our cash flow, lender interest in this new five-year credit facility was high. The support from our ten-member banking syndicate, led by Bank of America, has remained strong. The increased amount of Mac-Gray’s revolver and the overall favorable terms of this agreement are a reflection of our operating stability and the current health of our balance sheet,” said Shea.