The Eastern Company, an industrial manufacturer of engineered solutions serving commercial transportation, logistics and other industrial markets, established a new five-year, $90 million senior secured credit facility. The new facility replaces the company’s existing facility, which would have expired in August 2024.
TD Bank was the lead arranger for the transaction. Wells Fargo Bank, Bank of America and M&T Bank also served as lenders.
Terms of the facility include a $60 million senior term loan, a $30 million revolving facility and an option to borrow an additional $75 million under certain circumstances. The facility pricing is grid based, with an initial interest rate for borrowings under the facility of SOFR plus 237.5 basis points. In addition to retiring its existing facility, the company intends to use the proceeds from the new credit facility to fund working capital and potential acquisitions.
“The successful syndication of this bank facility and the expansion of our lender group is a vote of confidence in our operations and provides capacity to support our growth objectives,” Mark Hernandez, president, and CEO of The Eastern Company, said. “The new facility provides us with increased flexibility and will allow us to continue to drive improvements across the company, execute our growth strategy and increase shareholder value.”
The company used approximately $60 million of borrowings under the new credit facility to retire approximately $59 million of term loan debt outstanding in its prior credit facility and pay expenses associated with the new credit facility. As a result, in the second quarter of 2023, the company expects to record a non-cash, after-tax charge of approximately $0.1 million or $0.01 per share in deferred debt issuance costs associated with the early termination of the facility that was replaced. After-tax cash interest increases from the new credit facility, assuming an average borrowing of $59 million, will be approximately $0.2 million or $0.03 per share in fiscal 2023. As of June 16, 2023, the company had approximately 6.2 million fully diluted shares outstanding. Additionally, the company terminated its August 30, 2019 interest rate swap agreement and received approximately $1.6 million.
