Grocery retailer Spartan Stores has amended its Congress Financial-led credit facility to increase the size, lower the interest rate and prepay higher-priced debt, potentially saving $2 million a year in interest expense. The new five-year, $215 million facility replaces a four-year, $170 million line and is priced 100 basis points lower.
"The primary driver for doing that is at the time we also took out a subordinated lender so that utilized some of the facility," said Bill Jacobs, treasurer of the Grand Rapids, Mich.-based company. Proceeds were used to prepay without penalty $13.9 million of higher-priced debt with Kimco Realty Corp. that was taken out at the end of 2003. "[It also provides] for some further growth should the opportunity arise while we were able to access the market." Availability has increased by $25 million.
Pricing is tied to a grid based on availability and is currently at the lowest point, LIBOR plus 1 3/4%. This can flex 50 basis points depending on excess availability. Jacobs said Spartan was satisfied with the pricing. "You always want to go lower, but I think it's fairly representative of a market for similarly situated companies," he noted.
All the other existing lenders, including Key Bank, Fleet Capital Corp., National City Business Credit, GE Capital and Fifth Third Bank participated. "Our group of lenders [was] interested in increasing their commitments and we were interested in increasing our facility size," said Jacobs. "It was available, we took advantage of it and it brings us in line with the market," he concluded.