United Rentals has completed an offering of $210 million, 103/ 4% senior notes and has amended its current credit facility to give the company a softer cushion for its minimum interest coverage ratio requirements. "It was an opportunistic move based on the availability of capital in the high-yield market to get additional flexibility [for the credit facility]," said John Milne, president, cfo and director for the Greenwich, Conn.-based equipment rental company. "We anticipated to be in compliance," said Milne, explaining that the company wanted the extra breathing room as the construction industry is exposed to cyclical changes and the market downturn. "It's not a change in our view of our business," he added.
The interest coverage ratio requirements were changed from 1.5 times in 2003 to 1.25 times, while the ratio decreases from 1.75 times to 1.35 times in the first two quarters of 2004 and 1.4 times in the second two quarters of that year. Milne added that United Rentals' ratio was at 1.77 times at the end of third quarter 2002. The credit's revolver was decreased from $750 million to $650 million as part of the agreement, he added. The term loan "B" was also paid down by $100 million. Pricing on the April 2001-instituted line falls on a grid priced between LIBOR plus 13/ 4-23 /4%. The secured revolver is set to expire in October 2006, while the $639 million "B" loan matures in October 2007.
The company anticipates over $500 million in availability left on the revolver after fourth quarter 2002 figures are assessed, Milne noted. J.P. Morgan leads the credit, while Bank of America, Fleet Boston Financial, Salomon Smith Barney, and Credit Suisse First Boston also hold large pieces of the facility with about 20 other banks in the syndicate, Milne said. The amendment received 94% lender approval. "It wasn't a matter of [any lenders] holding out, it was a matter of getting the paperwork into the administrative agent," explained Alfred Colangelo, v.p. of finance. He stated that the amendment's timing during the holiday period prevented all of the lenders from responding on time, resulting in the less than 100% approval.