Riverside, Calif.-based Fleetwood Enterprises has amended and reduced its $260 million Bank of America-led credit because it was not going to meet the terms of the deal, which closed this past summer. "The initial facility was based on optimistic numbers, which were reachable," said Kathy Schneider, director of investor relations. Fleetwood needed to have EBIDTA of $17.7 million in the second quarter and these figures were not going to be met, she said. The EBIDTA requirement was going to be tough pre-Sept. 11, but became virtually impossible afterwards, Schneider explained, and so a covenant change was necessary.
The loan has been permanently reduced to $220 million, while one of the amendments is the replacement of the EBIDTA covenant. Instead there is a free cash flow covenant that takes into account a whole range of factors, including capital expenditure and service on junior subordinated debt, Schneider stated. Some of the problems are sectoral, said Schneider. "Manufactured housing has seen an industry-wide slump. Similarly, the recreational vehicle industry." She explained though that Fleetwood has fallen behind in innovation. "The company is still number one in the RV sector, but did not change models," she noted. Fleetwood has been working for the last two years to remedy the problem, she added.
One of the reasons Fleetwood adopted a bank line in the first place was for the less restrictive covenants than on its long-term notes (LMW, 8/12). Pricing on the line is LIBOR plus 33/ 4%, after rising 1/2% during a tough syndication. The company began to seek out the deal last fall, before the economy took a turn for the worse. Other lenders in the syndicate are Citicorp, Heller Financial, Foothill Capital, GMAC Commercial Credit and CIT Group.