Transportation Technologies Industries (TTI) had three goals when the company went after a new $265 million credit: to refinance an expiring revolver, to take out term debt that had an increasing amortization schedule, and pay down a portion of subordinated debt that carried a 15% coupon, explained Donald Mueller, v.p., cfo and treasurer. TTI accomplished these goals by using the new credit to replace an existing loan including $12 million outstanding under its revolver, a $45.5 million "A" term loan and $130.1 million "B" term loan. The company also paid off $21 million of subordinated debt leaving $100 million outstanding.
The new loan comprises a $50 million revolver and a $115 million first-lien term loan. The credit also incorporates a second-lien, $100 million term loan. "We wanted the additional financial flexibility that this structure provided," Mueller explained. He noted that the company liked the call schedule of the second-lien piece relative to the subordinated debt and also liked the leverage requirements of the second-lien loan compared to the first-lien tranche. With the new financing, the company's weighted-average interest cost improved slightly, although Mueller declined to comment on the exact pricing of the new financing.
Credit Suisse First Boston, Lehman Brothers and Wachovia Securities hold the lead roles on the company's new credit. Wachovia led the former facility. Mueller said the company chose the banks based on their proposals, but he declined to elaborate. He noted that all the banks included the idea of the second-lien financing in their proposals. But he explained that the company had originally seen the second-lien structure in the marketplace and asked the banks to consider incorporating the piece into the refinancing.