New product lines and rising copper prices have meant an increase in working capital needs -- and a tweak to an existing credit facility -- for copper wire manufacturer Encore Wire. The company headed back to incumbent banks Bank of America and Wells Fargo in September for the second increase to its credit facility this year. Encore increased its revolving credit facility by $50 million to $200 million, said Frank Bilban, cfo.
The company's existing five-year, $150 million revolver was originally put in place in August 2004. Encore amended the facility back in May, bumping up its credit line from $85 million. In September, the company announced a partnership with electri-flex to distribute its new armored cable line. The new line came at the same time as higher copper prices, which ranged from $1.50 per pound to as high as $4 for COMEX spot copper this year, and created increased production costs. This combination of greater production needs and increased copper prices led to the decision to increase the facility. "With the growth in the company's sales, we had to," Bilban said.
The company did not make any other changes to the debt structure. "[We] just upped the credit line," Bilban said. The tenor of the facility remains the same, maturing in August 2011. Bilban said pricing also remained the same, but declined further comment. Bloomberg listed pricing at LIBOR plus 87.5 basis points.
Along with the revolver, the company added $55 million of five-year, unsecured notes at the end of September. It currently has $45 million in existing 5.27% seven-year senior notes already in place, according to a filing with the Securities and Exchange Commission. Bilban noted that the $55 million of notes are at lower rates than the existing $45 million, but would not comment further.