MDC Partners repaid $92 million of expensive debt with proceeds from a new $100 million revolver led by J.P. Morgan. The new revolver carries a spread of LIBOR plus 2 1/2%. The previous debt, which comprised senior, mezzanine and term debt, had a spread of 7.2%. "It was an important facility for the company--it reduced costs and extended the maturity," notedSteven Berns, executive v.p. of the marketing communication firm.
In addition to proceeds from the new facility, $45 million of cash on hand was used to repay the old debt. "We reduced $90 million in debt, but only incurred $50 million of new debt to do that because we had implemented a cash management program simultaneously," Berns noted. "Concentrating cash allowed us to only borrow $50 million and take out $90 million because we had $40 million of cash on hand to do that."
The previous debt was held with a group of institutions, but this deal brought in a U.S. money center bank, Berns explained. Other lenders are Toronto Dominion Bank, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce. "The company was satisfied by everybody's participation as well as all of the professionals who worked on this facility at all of the institutions," Berns said. The new credit matures in 2007 and has an accordion feature which allows it to be increased to $130 million. There were maturities coming due on the old lines but those dates were modified earlier in 2004 because this facility was in the works, Berns said.