TD Securities is bringing to market a $180 million credit facility for Stillwater Mining Co. The new facility will refinance existing bank debt at a lower spread. "[The existing credit] was put in place when our cost of capital was considerably higher," noted Gregory Wing, Stillwater's cfo. "This gives us the opportunity to hopefully bring down our interest costs."
The new deal will comprise a $40 million revolver and $140 million "B" loan. Wing said pricing for the new facility has not yet been set and he declined to comment on how the existing facility is priced. "Rates are kind of turning upward at this point so it's a good opportunity," Wing said, explaining the timing behind the transaction. Stillwater currently has a $128.5 million "B" loan and a $25 million revolver.
An affiliate of Russian-mining company MMC Norilsk Nickel bought 51% of Stillwater in 2003 and the revolver capacity has been brought down due to some provisions of the agreement. "When they purchased the shares, $100 million was in cash and the rest of the compensation was funded by giving us 877,000 ounces of palladium in a vault in London," Wing noted. The transaction was valued at $257 million, based on the price of palladium when the deal closed in June 2003.
One condition of the Norilsk agreement required Stillwater to take $50 million in cash of the $100 million and use it to fully repay the company's old "A" loan. Another term is that as Stillwater sells off the palladium ounces that are in inventory it will offer half of the proceeds of the sale to the banks that are in the existing "B" loan. "They are not obligated to take the proceeds, but if they do, it pays down the term 'B.' If they don't take them then our capacity is reduced under the revolver," Wing explained.
Under the new facility, the company will still be required to use a portion of proceeds from palladium sales to pay down debt. Stillwater is selling the palladium to automakers for use in emission converters over a two-year period, according to Standard & Poor's. Assuming a conservative market price of $200 per ounce, the palladium sales will generate $22 million of cash before tax each quarter, S&P adds. TD bankers did not return calls.