Workflow Management has secured a new $180 million credit with softer covenants and relatively lower rates in order to remain in compliance with its credit agreement during a downturn in the printing industry. The new line replaces a $180 million revolver on which Workflow had breached EBITDA-based covenants last April, said Michael Schmickle, executive v.p., cfo and secretary. He explained that the previous cap on leverage was 3.75 times, while Workflow's multiples are presently more than four times. The company obtained waivers on the covenants, but pricing climbed to LIBOR plus 12% levels with the covenant breach. The new agreement provides more relaxed covenants, including a senior debt leverage provision shifting from 4.9 times down to 3.9 times by the end of 2003.
The new facility, led by FleetBoston Financial, includes a $100 million asset-based revolver, priced at LIBOR plus 5%, advanced on accounts receivables, inventory and fixed assets. The $30 million "A" loan is priced at LIBOR plus 8%, with semi-annual principal amortization payments of $5 million for two-and-a-half years. The pro rata matures in June 2005.
There is also a $50 million "B" term loan, maturing Dec. 31, 2003, with escalating quarterly interest rates increasing from LIBOR plus 11% to 12% to 13% and to 14% throughout the year. The term loans are secured by all of the remaining assets of the company, Schmickle noted. He added that given the previous rate, the new terms are as good as can be expected.
Palm Beach, Fla.-based Workflow has been hit by the struggling economy, Schmickle stated. He explained that much of the company's printing business has fallen victim to the presently anemic advertising sector. "People aren't advertising," he said. Lenders to the credit also include Bank One, Comerica Bank, Bank of America and Union Bank of California.