USEC, a supplier of enriched uranium fuel for commercial nuclear power plants, recently reworked its credit facility into a longer and larger deal. The changes came ahead of an approaching loan deadline and amid improved market conditions and plans for a new American centrifuge plant in Ohio. JPMorgan, Merrill Lynch and Goldman Sachs lead the deal, which is now a five-year, $400 million revolver.
With the Bethesda, Md-based company's three-year, $150 million revolver set to expire in September, USEC chose to negotiate with its banks to expand the borrowing capacity on the new, renewed loan. "We chose to increase the facility because of the stage the company is in right now," said Ellen Wolf, senior v.p. and cfo. "We are moving into development and implementation of an American centrifuge plant. This provides us with the flexibility to cover cash needs at any point in time." The company will also use the funds to repay a $325 million note due January 2006. The decision to extend the maturity was based on the idea of matching the expected close date of the centrifuge plant in 2010.
Pricing on the facility was also about 50 basis points lower than the old revolver. "I think [the banks] have taken a harder look at understanding the business," Wolf said. "When we put the original volume in, nuclear was not as well received as it is today. The acknowledgement of that and the better understanding of the assets of this corporation and the risk level of this corporation [led to the improved pricing]."
USEC is building an American centrifuge Plant in Piketon, Ohio, where the company previously housed a plant. The new facility will host next-generation uranium enrichment technology, which is more efficient than the current technology, using about 90-95% less power, Wolf explained. Currently, the company is the U.S. government's executive agent for the Megatons to Megawatts program, in which 500 metric tons of weapons-grade uranium is dismantled from Russian nuclear warheads into uranium fuel and used by USEC customers. The company also operates a uranium enrichment plant in Kentucky. It had an operating income of about $73 million in 2004.
JPMorgan led the company's last revolver and after meetings with a number of financial institutions, USEC decided to go back to the bank for this facility. "We are extremely pleased with the work they have done and we chose them for a number of reasons: No.1, the knowledge of the industry; No. 2, the bank's capabilities, they were every successful for our last revolver," Wolf said.