Goldman Sachs and Wells Fargo are leading a $500 million credit facility for VCA Antech that will lower interest costs by refinancing bank debt and bonds. The $500 million loan consists of a six-year, $425 million "B" loan priced at LIBOR plus 1 1/2% and a $75 million five-year revolver with price talk of LIBOR plus 1 1/4-1/2%. Currently VCA has a $225 million term loan that is priced at LIBOR plus 1 3/4%.
The Los Angeles-based company is also conducting a tender offer for $170 million of 9 7/8% senior notes due 2009 of Vicar Operating, a subsidiary of VCA. "The bank market is very attractive, the spread, the margins are at low rates right now," said Thomas Fuller, v.p. and cfo. "We believe we can do the whole thing because the market is good and our track record with growth and EBITDA is very strong with the banks." In 2004 the company had $149 million of EBITDA.
The term loan will be used to repay the existing bank debt and the notes. Approximately $35 million will be used for fees and other expenses as well as putting about $9 million on the company's balance sheet. The facility is expected to close the week of May 9.
VCA went private following a leveraged buyout in September 2000 and as a result put about $500 million in senior debt, sub debt and preferred stock on the books, some of which was quite expensive, Fuller said. In 2001 it went public with the proceeds of equity and senior sub notes used to pay down debt. When the financing is complete Fuller said the company is looking to "continue to grow as we have in the past and take our free cash flow and continue to deleverage."