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| Dario Sacomani |
Richardson Electronics has tied up a five-year, $109 million revolver with J.P. Morgan that offers substantially better terms than the previous line. "The combination of delevering and the current interest rate environment allowed us to negotiate a very competitive deal," saidDario Sacomani, senior v.p. and cfo of Richardson, which provides engineered solutions for the RF and wireless communications market.
Richardson's previous $102 million facility was set to expire next September, but in order to keep the debt classified as long-term on the balance sheet, the company opted to renew its facility now, Sacomani said. The timing worked out well. According to Sacomani, the new revolver, which has a $25 million accordion feature, has more flexible covenant ratios, relaxed leverage ratios and increased borrowing base advance rates than the prior agreement. Pricing for both deals is based on leverage, but the old deal went from LIBOR plus 1 3/4-2 3/4%, while new pricing is LIBOR plus 1-2%.
Richardson has been managing its working capital more efficiently to be able to fund its growth through working capital instead of leverage, said Sacomani. The company also recently delevered through an equity offering in the summer. The new revolver will be used for working capital requirements and the company can apply up to $38 million of the credit line toward the redemption or repayment of existing convertible debentures.
Harris Bank, LaSalle Bank, National City Bank and Bank One participated in the old facilities. All are still involved and J.P. Morgan has come in through Bank One. "They are knowledgeable of our business because they've been with us for a long time," Sacomani said, adding that this particular bank group is mid-tier focused. Rudy Garcia, Richardson's treasurer emphasized the company's relationship with J.P. Morgan started more than 10 years ago. "It's J.P. Morgan through Bank One, through the acquisition of American National Bank," he noted. Richardson's lead banker at J.P. Morgan is Greg Teegan.
Richardson did look at other options though. "We talked to a variety of banks just to make sure that the deal we were getting was competitive and it was." Sacomani described the company's relationship with its bank group as, "a very open relationship. They know us, we know them, and that's proven to be very successful."