Engineered Support Systems received an accordion feature with its new $125 million, five-year revolver, allowing the company to increase the size of the facility for future acquisitions. The accordion feature permits the company to increase the size of the loan in $25 million increments up to $200 million, explained Gary Gerhardt, vice chairman and cfo of Engineered Support. The company plans to tap $66.5 million of the new facility to back its acquisition of TAMSCO later this month, but Gerhardt declined to identify other potential targets.
Bank of America leads the deal. Gerhardt said the bank not only has a very strong presence in St. Louis where the defense contractor is headquartered, but B of A has been working with Engineered Support for about a decade. Gerhardt noted that a strong relationship is a key factor in choosing a lead bank.
The size of the new facility was determined by taking into account the availability that Engineered Support would have under the deal after the TAMSCO transaction and working capital needs. The company also wanted to be able to complete small acquisitions with ease and without tapping the accordion feature. The new facility replaces the company's $145 million revolver that was syndicated in 1999. The spread on the new deal is the Eurodollar rate plus 11/8%, which is slightly lower than the pricing on the company's former credit. Gerhardt declined to be specific. "The market is not too bad for good companies," he noted.