Deutsche Bank's $700 million credit for Williams Scotsman is backed by collateral that will provide substantial recovery for bank debt holders in a default scenario, according to Moody's Investors Service, which has placed a B1 rating on the credit. The deal is currently in the market and GMAC Bank and Congress Financial have signed on as co-documentation agents committing $50 million each, according to an official close to the syndication. The credit comprises a $500 million, five-year revolver and a $200 million term loan "B" both priced at LIBOR plus 3%.
The asset-based deal, which is backed by a lien of all the company's assets including its rental assets, receivables, inventory, licenses and trademarks, and subsidiary stock, is "getting increased looks," said one source. The credit's borrowing base is also limited to 85% of the company's eligible accounts and the lesser of either 85% of the orderly liquidation value or 70% of the net book value of the eligible rental fleet.
As a highly leveraged company, however, Williams Scotsman would be relatively inflexible in times of economic stress, according to Moody's analyst, Kirk Belanfanti. While its new bank credit provides adequate backing to lenders, recovery rates for its unsecured notes are likely to become stressed in a case of default. The B1 rating considers the company's flexibility to achieve its goals such as building its fleet, contending with competitors, and servicing its debt, said Belinfanti, adding, "To the extent that the economy is doing well, they will do well."
The company draws its advantages from a diversified market, geography, and customer base. In addition, the company generates free cash flow, growth in revenue, and its exposure to cyclical business is likely to help the company as the economy improves. Utilization rates of William Scotsman's fleet of 94,000 mobile homes and storage units, currently at a historical low of 82%, should pick up as well. Calls to Gerard Keefe, senior v.p., cfo and treasurer of Williams Scotsman, were not returned by press time.