Dobson Communications Corp. combined two of its subsidiaries-- Dobson Cellular Systems and Sygnet Wireless -- and two of its existing credit facilities and gained more flexibility in the process. The new bank debt was not a refinancing. Instead, Richard Sewell , v.p. and treasurer, explained, the company "blew up the old [credits] and did a brand new one." The new facility consists of a $550 million, six-and-a-half year "B" loan and a $150 million, six-year revolver. Dobson also has the ability to increase the new debt by up to $200 million by luring new lenders, without the necessity for an amendment.
Under the more flexible loan, the company will be able to upstream money from the borrower to the parent company. Until the company reaches a leverage ratio of 4.15 times--it is currently around five times--Dobson will be able to direct half of its excess cash flow upstream to the parent company. There must be more than $50 million of liquidity at the borrower level for the upstream provision to apply. The other half of the excess cash flow must be directed to a prepayment of the new bank deal. After the company reaches leverage of 4.15 times, it will be able to direct all excess cash flow to the parent company.
The new facility also provides for improved cash flow due to less amortization. The term loan "B" only amortizes at 1% a year with a bullet maturity in the last four quarters, Sewell explained. Moreover, the covenants are set to match the company's cash flow and business environment. "We are building a new technology for our network. Our old credit facility did not give us the flexibility to build out a new technology," noted Sewell.
The Dobson operating company facility included a $130.2 million "A" loan and two "B" loans providing up to $149.4 million. Sygnet Wireless' credit consisted of a $3.4 million revolving credit facility and $263.7 million of term loans. The pricing on the new loan is LIBOR plus 3 1 / 4 % across both tranches. This compares to an average price across the former facilities of roughly LIBOR plus 2 1 / 2 %. Lehman Brothers and Bear Stearns are the joint lead arrangers and book runners on the deal. Bank of America was the lead on the former facilities. "We have a stronger working relationship right now with Lehman Brothers," Sewell said, noting that the bank helped lead a recent bond deal for Dobson. B of A did not participate under the new facility and Sewell could not comment on their absence.