Citigroup and J.P. Morgan have filled the books for Arizona-based Rural/Metro Corp.'s new loan. The ambulance and fire protection services provider is close to scoring a $155 million facility, split between a $20 million revolver, $15 million letter of credit facility and $120 million "B" loan. The official commitment cutoff is Feb. 25.
The pricing is LIBOR plus 3 1/2% across all tranches. The revolver is for five years, while the letter of credit facility and term loan "B" are for six years. Rural/Metro is also issuing $140 million of 10-year senior sub notes and $50 million of senior discount notes.
The new debt will refinance the $153 million drawn on Rural/Metro's revolver and outstanding bonds, said Liz Merritt, director of investor relations at Rural/Metro. Merritt said with its current credit facility maturing on Dec. 31, 2006 and senior notes maturing March 2008, it was "more rational for the company to address all of its debt right now." She then added, "We felt the capital markets were conducive to a refinancing and we would be successful in doing so rather than to wait until later or closer to the maturity of the credit facility."
In the past few years, Rural/Metro has improved its core ambulance operations, terminating unprofitable contracts and exiting weak markets. The company has also benefited from a more favorable reimbursement market and strong demand for its ambulance transport services. Wachovia Securities led Rural/Metro's last deal, which had to be amended. In 2002, prior covenant violations were permanently waived and the interest rate was increased to LIBOR plus 7%. "We had discussions with numerous large institutional banks and felt that Citigroup was the best fit for our company," said Merritt. The company had not worked with Citigroup previously.