Credit Suisse First Boston and Morgan Stanley are leading a four-and-a-half year, $100 million second-lien loan for Werner Co. Lenders are being offered LIBOR plus 10% on the Caa1-rated debt. The second lien will repay $26.7 million from the company's $50 million revolver and satisfy $65 million of amortization payments.
Werner, which is a portfolio company of Leonard Green & Partners andInvestcorp., has been struggling since November 2003, when Home Depot, its largest customer, said it would purchase its aluminum and fiberglass stepladders directly from China. This caused the bank debt to drop to the high 80s. The debt rallied when the ladder and climbing equipment company struck an agreement with Lowe's Companies but declining sales required an amendment in May 2004 that moved up the interest rate 75 basis points on the $165 million "B" loan.
Werner stated in its third quarter 2004 10-Q that it expected 2005 financial performance to be negatively impacted by competitive pricing, significantly higher commodity material and freight costs, and higher product liability insurance costs.
Moody's Investors Services has downgraded all of the company's current debt ratings with the bank debt now at B3. The $135 million of 10% senior subordinated notes due 2007 were downgraded to Caa2. Debt-to-EBITDA is now over seven times and interest coverage is around one time. The review was prompted by the announcement that Werner has suspended financial filings with the Securities and Exchange Commission. A call to Larry Friend, cfo, was not returned by press time.