Bank of America held a bank meeting last week for Stewart Enterprises to increase its "B" level debt by $50 million for the redemption of its Remarketable Or Redeemable Securities (ROARS). The Metairie, La.-based funeral home and cemetery operator is expected to redeem the $99.9 million outstanding ROARS in May and the company wants to have the additional "B" debt rather than use its revolver exclusively, according to Martin de Laureal, v.p. of investor relations for Stewart. The company has availability under its $175 million revolver to fund the ROARS redemption, but by tapping the "B" market the company will enhance its liquidity after the transaction and will still have $70 million on the revolver rather than $20 million, he noted.
Stewart currently has $131 million of "B" loan debt. Pricing on the "B" is LIBOR plus 31/8%, though the spread was slightly higher when the loan was originated in '01. "The metrics have changed in terms of credit profile," he said, adding that Stewart had $950 million in debt in '01. "Now we have $545 million," de Laureal stated. Cash flow has improved significantly and instead of the spread rising with the additional term loan debt, Stewart would like to see the spread reduced, he added. "On a quantitative basis, the capital structure has improved and supports the investment," he said.
Stewart has a $300 million high-yield piece that has traded at 108-111 in the last 90 days, with a coupon of 103/4%, he added. The new piece is open to new as well as existing investors, de Laureal noted. B of A is the remarketing dealer for the ROARS. A banker at B of A declined comment.