Bank One won the lead role on K2's new credit facility over the incumbent Bank of America by offering the company the best proposal and taking the time to understand the company's sporting goods and recreational products business, said Dudley Mendenhall, senior v.p. of finance for K2. The new credit comprises a $205 million revolver priced at LIBOR plus 21/2% and a $20 million "B" loan with a 4% spread over LIBOR. Both the tranches have a three-year term. A B of A spokeswoman declined to comment.
The new facility helped the company to lower its cost of borrowing by allowing K2 to pay down the $33 million outstanding on a $58 million, 9% private placement note issue. The notes also restricted the company's ability to take on new debt and pursue acquisitions, which was out of line with K2's plans, noted Mendenhall. The new credit offers more flexibility, giving the company a borrowing base tied to receivables and inventory.
With the new credit, K2 also took the opportunity to consolidate its outstanding borrowings under the one facility. This includes approximately $64 million in debt that the company assumed in conjunction with its recent acquisition of the Rawlings Sporting Goods Company and K2's previous credit with approximately $30 million outstanding. The new facility is priced roughly 1/2% higher than the company's previous loan, an increase that Mendenhall attributed mostly to the larger deal size.