Paper-storage firm Iron Mountain has tapped J.P. Morgan for a seven-year, $150 million "D" loan to acquire Connected Corp. for $117 million and to buy out a minority interest joint venture partner. "We are opportunistic acquirers and we have had a busy year that will probably mark the beginning of a slowdown in acquisitions," said Stephen Golden, director of investor relations at Iron Mountain.
J.P. Morgan is the lead arranger on Iron Mountain's current debt, which consists of a $350 million revolver priced at LIBOR plus 2% and a $200 million term loan at LIBOR plus 1 3/4%. Moody's Investors Service has downgraded this debt one notch to B2 due to the company's continued appetite for debt-financed acquisitions, the growing risk profile of the company's business mix and the weak 3% estimated pro forma 2004 free cash flow to total debt. Total debt plus operating leases to EBITDA after the acquisition will be six times. "Debt-to-EBITDA is well within our covenant and our comfort zone," responded Golden.
Iron Mountain also has to consider a slowdown in acquisition activity due to possible anti-trust issues. "Due to anti-trust concerns, expansion would be limited to niche markets such as shredding and electronic data storage," said Andy Liu, an analyst at Standard and Poor's. "Long term, Iron Mountain will need to pay continued attention to the paperless office," he said.
Other banks in the lending syndicate are Bank of New York,Bank of Nova Scotia,Bank One,Bear Stearns,BNP Paribas,Calyon,CIBC World Markets,Citizens Bank andCongress Financial Corp.