 |
| Morry Taylor Jr. |
Titan International obtained a new $100 million revolver and issued $115 million of convertible bonds that will allow the machinery equipment supplier to retire some outstanding bonds and realize significant interest savings. The facility replaces the company's previous $99 million term loan and $20 million revolver coming due at the end of the year, said Morry Taylor Jr., Titan's president and ceo.
Last spring the company paid down about $39 million of its term loan and was contemplating a high-yield bond deal, said Taylor. But the company dismissed that option because of the higher interest rates. At the time Taylor was expecting 9-10% interest. Then, "Merrill Lynch recommended the company sell $100 million in convertible bonds and line up a $100 million revolver. That would allow us to pay the long-term bonds off and pay the senior bank debt down, saving $7-8 million in interest," Taylor noted. Titan had approximately $137 million of 8 3/4% subordinated bonds.
LaSalle Bank and General Electric Capital Corp. led the company's new facility and were also the lead banks in Titan's previous facility. "They've both been good lenders, they both moved really fast and they both waived [the] pre-penalty payment," Taylor noted. Merrill Lynch carried out the $115 million 5 1/4% bond issuance, which carries a conversion factor of $13.50 per share. Additionally, "[LaSalle's Chairman,] Norm Bobbins is what they call a business banker. Norm tells you what he expects from a business point of view. You appreciate the fact that he understands business choosing what's best so you don't get in trouble and you don't get him in trouble. Plus I can beat him in golf," Taylor explained.
Titan's previous term loan was priced at LIBOR plus 4 1/2%. The new revolver is priced at LIBOR plus 3%. The facility still has between $30 million to $40 million available that will be used for working capital purposes, Taylor noted. He said Titan approached its lenders and shopped the deal. "You have so many banks that don't want to be business banks anymore, they just want to be ATM machine banks, retail banks. The big banks, the ones that do GE and IBM, have lost the personal touch," Taylor said. "[Bobbins] is probably a good banker for mid-America."