Briggs & Stratton is set to close a $300 million revolving credit facility at the end of the month, adjusting pricing to current market standards in an effort to maintain its relationship with its lead lender. Due to its longstanding relationship with lead lender, Bank of America, the company knew pricing was a concern. "[Pricing] had been a topic of discussion for some time, but the [refinancing] was done on the company's incentive," said Jim Brenn, cfo of Briggs & Stratton. The existing deal was set to expire in April 2002. He says the existing deal was too small for the manufacturer of engines for outdoor equipment. "We wanted to guarantee liquidity," he said. "[The existing $250 million deal] felt snug in year four. It served us well for the first two years." Last year the company took out a $140 million, 364-day revolver to carry it through, but Brenn said that has run out as well. The new financing will be a three-year revolver, instead of the prior five-year maturity.
Brenn explained that the company has grown over the years, so additional financing was natural. "The company is bigger than it was four or five years ago in terms of revenue," he said. The lawn and garden industry is driven by housing starts, he explained. If your mower breaks, you're not going to just stop cutting your lawn, he said. "But if everybody is out of work next spring, our story will certainly be different."
The company did not go out to bid, but stuck with its original lenders because of relationship. "We have a 30-year history with B of A," said Brenn. "They're a dependable and stable partner." Brenn explained two banks left the bank group with the new financing, and others have expressed interest in coming on board. "The banks that left were looking for certain types of work," said Brenn, referring to the banks seeking issuers looking for other revenue generating services. Pricing on the new deal is LIBOR plus 11/ 4%.