Business improvements enabled Cinram International to amend its $1.175 billion credit facility to cut interest costs and modify financial covenants. Toronto-based Cinram borrowed the money a year ago to fund the acquisition of Time Warner's DVD and CD manufacturing and distribution businesses.
"We were a new issuer and we leveraged the company much more than it had been in the past. There was uncertainty with respect to the acquisition--integration had not yet begun," explained Lewis Ritchie, Cinram's cfo. Now it's a different environment. "Mostly through integration, things have gone well so far. It made sense to go back to the market to get better terms and conditions," he added.
The amendment allowed Cinram's "B" and "C" loans to be paid down and converted into a new $668 million "D" loan that carries a spread of LIBOR plus 3%. The "B" and "C" loans were priced at LIBOR plus 3 3/4% and LIBOR plus 5 3/4%, respectively. In addition, the spread on Cinram's $181 million "A" loan was cut 50 basis points to LIBOR plus 2 1/2%. The company's $150 million revolver was unchanged.
Citigroup is the lead arranger on the credit. "I think it was well received," Ritchie said. He explained that there is limited call protection if Cinram were to go back and reprice within a one year period. The major covenant change, meanwhile, was with respect to capital expenditures. "The DVD business is growing quite rapidly and we've been adding more capacity," Ritchie noted.