Richmond, Va.-based AMF Bowling Worldwide has received a $75 million debtor-in-possession financing from five lenders as it wrestles with repaying $625 million in debt. Merrell Wreden, v.p., investor relations, said "the company is past the point of equity or note issuance," explaining why the firm chose the DIP option. Citibank, Royal Bank of Scotland, Foothill Capital, SSF Investments and Farallon Capital Group have stepped up for the facility.
The $75 million will enable AMF to fund business operations, including payments to suppliers and vendors while the company is in Chapter 11. The lenders are part of the existing bank group, Wreden noted. Under the terms of a reorganization plan, the senior lenders will receive a combination of cash, debt and common stock of the reorganized company. The spread on the DIP is LIBOR plus 2 1/2% or Prime plus 1 1/2% at AMF's option, he added. The existing credit agreement was launched in 1996 with Goldman Sachs and Citibank.
Commenting on why AMF ran into trouble, Wreden said, "operating cash flow in 1997 was $70 million, but in 1998 it was only $6 million." AMF sold a lot of equipment in China, but after the Asian debt crisis, the market collapsed, he added. As the market recovered, a low-cost local producer emerged and captured business. AMF relies on markets where there is an emerging middle class, such as the U.S. in the 1950s and China in the 1990s, Wreden noted. AMF is now looking at South America and Eastern Europe, and the modernization in mature markets.