GE Structured Finance and affiliates of Oak Hill Advisors have won the lead roles on the new $195 million credit for SBA Communications Corp.'s SBA Telecommunications subsidiary. The new facility replaces the company's $300 million credit led by Lehman Brothers and Barclays Capital. "Their offer was more appealing to us," said Pamela Kline, v.p. of capital markets at SBA, of the switch to GE and Oak Hill. Kline declined to elaborate on what provisions set the new leads apart. Spokeswomen for Lehman and Barclays declined comment.
The new facility gives the company more flexibility in regard to the use of the proceeds than the former credit. "It's nice to have options," said Kline. "The important thing here is that it gives the company more flexibility." The proceeds can be used to build towers, buy towers, repurchase bonds or for any other valid corporate purchase, noted Kline during the company's recent conference call. The credit includes a $95 million term loan "A" and a $100 million revolver. Both tranches are priced at LIBOR plus 4% and mature in December 2007. The new facility also has an additional interest of 31/2% per annum that will accrue and become payable when the credit matures. The company has the option to convert the revolver to a term loan no later than June 2004.
Prior to the completion of the new facility, the company had anticipated being out of compliance with the covenants under its previous facility, which included a $200 revolver and a $100 million term loan, according to company filings.
But the covenants in the new credit agreement are calculated at the SBA Telecommunications level, and exclude the holding company's debt. Therefore the company has more of a covenant cushion with the new credit, Kline explained during the call. Covenants include a maximum leverage of 2.9 times, a debt per tower of $75,000 or less, and cash interest coverage of at least four times.