Boca Resorts is using proceeds from a $200 million term loan to redeem the company's outstanding $190 million of 9 7/8% bonds. "We're replacing nearly 10% debt with debt at LIBOR plus a couple hundred basis points," explained MaryJo Finocchiaro, v.p. and corporate controller. She declined to comment on the exact spread but said it is significantly less than the bonds. The luxury resort operator also put in a place a new $125 million revolver that replaced an old credit line.
Finocchiaro said the timing had to do with the bond call date. The bonds became callable April 15 and have a premium of roughly 5%. She added that the decision to do the deal was a "mutual coming together" between the company and lead arranger Deutsche Bank. "We obviously were motivated to replace our high interest-rate debt with cheaper debt and Deutsche Bank knew the company very well," Finocchiaro noted. Deutsche Bank had led the company's previous revolver syndicate. When it comes to finding a relationship bank, Finocchiaro said, "We're obviously looking for pricing and efficiency of transaction."
In addition to the lower interest rate the term loan is advantageous because it provides the company with more operating flexibility because of fewer restrictive covenants, she noted. The company previously just had a revolver and no term debt. Boca Resorts owns luxury resorts and golf courses in Florida.