Ultimate Electronics received an additional $25 million in financing from PNC Bank through an amendment to its Wells Fargo-led $50 million credit line that closed last September as the company needed more funding to support company growth and Wells Fargo would only extend an additional $5 million to the company. PNC was brought in to pick up $25 million in the recent adjustment. "I believe because of Sept. 11, it was a little difficult to get all of it at the end of September," said Alan Kessock, cfo of Ultimate, explaining that the company sought $80 million from Wells Fargo in the beginning of September, but had to raise the loan incrementally due to market conditions. Kessock speculated Wells no longer wanted additional exposure to the company after September.
The decision to double its former $40 million, three-year revolving credit facility was made to support company growth. "We have gotten bigger and we have been expanding for the last two years," explained Kessock. The $40 million revolver was intended to cover a company that had 30 stores and roughly $300 million in sales. Now Ultimate has 46 stores, looking to expand to 58 stores, and should record sales this year between $575-580 million.
The $80 million, three-year revolver, split between both banks, is priced on a usage-based grid ranging from LIBOR plus 13/ 4% to 21/ 4% with a pricing option. The previous facility was priced at LIBOR plus 2% with a rate floor that ensured all-in pricing of 6%. The new credit has no floor, and therefore the refinancing translates into interest savings for the company. Ultimate was able to negotiate the removal of the floor because of its better performance relative to three years ago, said Kessock. Over the next three years, Ultimate estimates a $300,000 savings in interest payments, he noted.