O'Charley's jumped back into the bank market to get reduced pricing and relaxed covenants on an existing $125 million revolver. The company cut its pricing grid by 100 basis points and eliminated the company's minimum asset coverage ratio. "Both changes in the bank markets and improved financial conditions [at] O'Charley's gave us more attractive pricing and better financial covenants," said Larry Hyatt, cfo.
The new credit is a five-year, $125 million senior secured revolving credit facility with the option to increase the facility by $25 million. Pricing on the new credit is based on a grid tied to the company's senior secured leverage ratio, running between LIBOR plus 75 basis points to 125 basis points, according to a Securities and Exchange Commission filing. The pricing grid on the previous facility ranged from LIBOR plus 1 1/4-2 1/4%. In addition to nixing the minimum asset coverage ratio, the new agreement also relaxes restrictive covenants, allowing such things as a bump up in the size of divided payments, up to $50 million from $25 million, according to SEC filings.
The company chose to stick with incumbent lead bank Wachovia Securities, but also added AmSouth to the lead role. "We have a very long relationship with AmSouth as well as Wachovia," Hyatt said. He explained that the company chose these banks because they were willing to make the biggest financial commitments. Both banks were involved with the company's previous credit, but AmSouth played a smaller role. Bank of America, Key Bank, JPMorgan, Fifth Third Bank, First Tennessee Bank, SunTrust Bank and U.S. Bank are on the new facility as well. "We have a great group of nine banks many of which were participants on the previous facility and a number of new banks," Hyatt said. "We are looking forward to working with all the banks."