J.P. Morgan and Bank of America are arranging a $290 million credit facility for DURA Automotive Systems to enhance liquidity and refinance its existing $175 million revolver and $111 million "C" loan. The new bank loans consist of a five-year, $175 million asset-based revolver and a six-year, $115 million second-lien term loan. Pricing on the term loan is LIBOR plus 3 1/2%. The current "C" loan is priced at LIBOR plus 2 1/2%.
The facility was amended in February to provide covenant relief on total leverage, senior leverage and interest coverage ratios. Dura also repaid $35 million of the "C" loan.
The company was downgraded by Moody's Investors Service last month because of a downward revision of its first quarter and full-year 2005 guidance. Though bank leverage is relatively low, total leverage is expected to exceed 6 times. Projected EBIT coverage of cash interest has also declined and is expected to hover just above 1 time. The company has $400 million of 8 5/8% bonds due 2012 and $456 million of 9% notes due 2009 as well E100 million of 9% bonds and $55.25 million of convertibles. Calls to Keith Marchiando, cfo and v.p. were not returned.
Dura designs and manufactures components and systems for the global automotive industry including driver control systems, structural door moulds and exterior trim. There are a number of negative variables affecting the business including declining volumes of North American automakers, slower than expected OEM launches of certain new programs in Europe and raw material costs. Moody's expects that Dura will generate only breakeven cash flow during 2005 and will be unlikely to reduce net debt until 2006.
But the performance is likely to be more stable than other Tier I/Tier II automotive suppliers due to significant diversification across customers, geographics, product lines, and vehicle programs--17% of revenues are associated with the recreation and specialty vehicle markets which have different cyclicality, according to Moody's.