A new $975 million revolver replacing a $2 billion credit line reflects Corning's slimmed down size after its revenue and workforce decreased by almost half in the past four years following the burst of the telecom bubble. When it took out the $2 billion revolver in 2000, the diversified technology company and once famed glassmaker, was focused on growth and expansion. Now it is primarily focused on reducing debt. "We'll take the debt off the books...we'll continue debt reduction and continue to have good liquidity," said Mark Rogus, treasurer and senior v.p.
In 2000 Corning had net sales of $7.1 billion with 43,000 employees. By the end of 2004 Corning posted revenue of $3.8 billion with 23-24,000 employees. Prior to 2001, the company's debt was rated at a2 by Moody's Investors Service. The company is now rated double-B, but Rogus said it is hoping to get to triple-b minus. "The market likes our credit," he said. "They view us as being more investment grade than where we are today."
Moody's had rated the $2 billion facility at Ba2 but Corning did not request to have the new facility rated. In order to reach investment grade, Moody's analyst George Meyers said, "They need to perform well operationally. The recasting of this revolving credit is seen as a positive...They have had a number of challenges and have done quite well in managing those challenges," Meyers said.
The new five-year, unsecured multi-currency revolver replaced the $2 billion revolver set to mature in August. The company had asked for $750 million but due to oversubscription was offered more and settled on $975 million. "We took some more from the banks since they offered it to us," Rogus said. "We thought it was a good insurance."Citigroup Global Markets and J.P. Morgan lead the deal, with nine other banks participating. The facility has ratings-based pricing, but Rogus declined to provide further information.
The old facility was for commercial paper back up. "During a downturn, it was viewed by capital markets and banks as a sort of facility of last resort. We made a conscious decision not to touch it," he said. Although the company does not intend to draw from this facility either, it does have the capability. "We have no intention to use it, but while we're marching our way back to investment grade, this facility does play a role in our capital structure," he said.
Citigroup and J.P. Morgan were both involved in the company's 2000 facility. Rogus said the two leads were chosen because of their international reach and Corning liked the idea of two banks. "We like the advice," he said. "Advice from one [bank] is fine, but from two we find it a little more balanced and better."