Terex stuck with a trusty team of bankers and added UBS as a lead to complement its incumbent lead banks Credit Suisse and Citigroup for its new credit facility. "The team from Credit Suisse that we had worked with for many years on the investment banking relationship side had moved to UBS about 18 months ago," said Charles Snavely, treasurer. "We liked the team and when they were able to deliver UBS as a commitment to the company, we thought that it made sense to make them one of the leads." David Dolezal, director in the UBS investment banking division in Chicago, leads the team that has worked with Terex. Dolezal was traveling and could not be reached for comment.
The company recently closed on a newly expanded $900 million credit facility to support financing for the company's expansion. "Terex grew through acquisitions pretty heavily from 1995 to 2002 and Credit Suisse was involved in either an advisory role or financing role in those deals...and that team had been involved in those deals," Snavely said. "They had a lot of good experience and they understand the company well."
Westport, Conn.-based Terex manufactures a broad range of equipment for use in industries including construction, infrastructure, quarrying, surface mining and shipping. It acquired numerous construction equipment companies in the past few years, both in the United States and in Europe, according to Snavely. "We consider making acquisitions one of the company's core strengths we've been a smart buyer in the past and a disciplined buyer and will continue to do so," he said. The company's most recent acquisition included a 50% interest in China-based Sichuan Changjiang Engineering Crane Co. in April, according to a release.
"We needed a larger facility because the company had grown so substantially," said Snavely. The company chose to increase the revolver from $300 million to $700 million and slightly decrease the term loan to increase liquidity and better match the company's cash needs. The new credit consists of a six-year, $700 million revolver and a seven-year, $200 million term loan. The previous credit had a $231 million term loan.
Terex was able to cut 75 basis points from each tranche of the new facility, settling at LIBOR plus 1 1/4% on the revolver and LIBOR plus 1 3/4% on the term loan. "Pricing on the new facility was a lot lower. We have historically managed our liquidity needs by holding cash on the balance sheet," said Snavely. "The larger facility helps us take cash off the balance sheet and use the revolver to borrow to fund working capital if we need to."
The new facility also gave the company more freedom, slashing covenants down from four to two. Another company representative said Terex's favorite feature of the new credit is the collateral release trigger so, as the company's credit ratings continue to improve, the company will remove the collateral provision backing the debt. Moody's Investors Service assigned a Ba3 corporate family rating with a stable outlook and Standard & Poor's assigned a BB rating.