VCA Antech has refinanced $166.4 million in bank debt through lead banks Goldman Sachs and Wells Fargo, chopping pricing and increasing possible acquisition funding. The Los Angeles-based veterinary healthcare network approached the banks primarily to arrange better pricing, said Tomas Fuller, VCA's cfo. "[Given our] solid performance and the improved bank market, we saw the opportunity to get one more pricing adjustment," said Fuller. Last September, VCA refinanced $143.1 million of total outstanding "A" and "B" term loan debt with a "C" tranche, scoring a 63 basis point reduction in the interest rate.
In this latest repricing, VCA retired $146.4 million of the $166.4 million "C" loan into a new "D" tranche, reducing the spread 50 basis points to LIBOR plus 21/2%. The other $20 million on the "C" term loan was repaid in cash. The money saved will be channeled toward paying down debt, Fuller said. "[We] fund operating needs and growth needs with internal funds, and we'll continue to throw down free cash to reduce debt," Fuller added.
Covenant changes in the refinancing also give VCA added flexibility, as the banks increased the limit on the company's acquisition basket from $30 million to $40 million. "Given our performance over the past couple of years, they were comfortable allowing us to [do] that," said Fuller. VCA's original credit, signed in September 2000, was a $400 million facility. Buyout firm Leonard Green & Partners took VCA private at a cost of $321 million in 2000. The company went public again less than a year later.