Auto-parts retailer AutoZone has recently added a $150 million credit to its $200 million "A" term loan, extending the maturity 18 months past its former May 2003 expiration date. The company also renewed a $300 million, 364-day revolver that will be used to back up its commercial paper program, according to Michael Archbold, senior v.p. and cfo.
The amended credit is designed to reduce the company's reliance on the CP market and to better align the debt maturity schedule of the overall company, said Archbold. After Sept. 11, accessing the CP markets was difficult, but lately the company has found good execution. The new credit is a way to diversify the capital structure, Archbold said.
The company chose to extend the term loan rather than syndicate a new one for two reasons. First, extending the credit allowed the company to stagger the maturities on its short-term debt. Second, the company was able to lock in current pricing spreads and reduce its sensitivity to the changing rate environment, Archbold noted, declining to disclose the pricing.
Crédit Lyonnais, Northern Trust, Regions Bank and Norinchukin Bank were brought in to pick up the added exposure. J.P. Morgan and Fleet Bank, two of the company's longstanding relationship banks, led both the extension and the original deal and Archbold noted the good execution. "We laid out a plan as to what we wanted to do and how this would help us accomplish our goals," he said.