Monro Muffler Adjusts Covenants
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Monro Muffler Adjusts Covenants

Monro Muffler Brake has obtained a new $110 million credit facility with an adjusted debt-to-EBITDAR (EBITDA plus rent) covenant that allows the company to tap the funds under the deal to pursue acquisitions. Since the former credit was completed in 1998, Monro Muffler has paid down about $40 million of debt, performed well, digested the acquisition of 205 stores from Speedy Muffler King, and is now ready to pursue more acquisitions, explained Catherine D'Amico, Monro Muffler's executive v.p. of finance and cfo. But the former credit was structured so that the debt-to-EBITDAR covenant stepped down annually and at the time of the refinancing was 3.5 times, restricting the amount the company could use for acquisitions.

Now with the new facility, which allows up to 4.25 times debt-to-EBITDAR, Monro Muffler is better positioned for growth over the next three years and will target store acquisitions, said D'Amico. The new facility consists of an $83 million, three-year revolver and a $27 million, five-year synthetic lease. D'Amico said pricing on the revolver is linked to a leverage-based grid allowing for a variation between LIBOR plus 3/4% ­ 21/4%. The revolver is currently priced at LIBOR plus 11/2% and the synthetic lease is priced 1/8% higher. The former deal was priced similarly but included a $75 million revolver, a $25 million term loan, and a $35 million synthetic lease expiring in September 2003.

The club deal is led by J.P. Morgan. The company's relationship with the bank dates back to when Monro Muffler worked with Lincoln First Bank, which was acquired by Chase Manhattan Bank in 1983. Other firms in the bank group include FleetBoston Financial, Citizens Bank, HSBC, Charter One, Key Bank, and M&T Bank. Monro Muffler works hard to provide the group with ancillary business, noted D'Amico. "All things being equal, we keep everything in the bank group," she said, noting that Monro Muffler makes an effort to "spread the wealth."

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