Rumpke Consolidated chose Bank of America to lead its new $110 million credit facility, allowing the company to refinance debt that included a high-interest subordinated piece. B of A replaces incumbent General Electric Capital Corp., partly due to B of A's prominence in the waste industry. "Bank of America is widely known and respected in the waste industry," said Phil Wehrman, Rumpke cfo. In addition, "GECC is considered by some to be a lender of last resort. We thought we would have a better chance of success to fill the facility [with B of A as lead]," he explained. GECC did, however, take on a large exposure to the new credit, he added. Calls to GECC were not returned.
The new loan comprises a five-year, $45 million revolver; a five-year, $45 million "A" term loan; and a six-year, $20 million "B" piece. The former credit was originally closed in November 1997 and included a $50 million pro rata, a $20 million "B" piece and $50 million of subordinated debt. While pricing on the new credit is similar to the old linked to a leveraged-based grid and set between LIBOR plus 21/ 4% to 33/ 4% the subordinated debt bore a coupon of 13%. On the company's new $110 million of debt, it pays an average-weighted interest cost of 5-6% compared to the 9-10% it was paying on its former $120 million in debt.
The new credit is intended to help the company move into a position where it can become a bigger player in the waste management industry. The company anticipates stronger cash flow to meet its amortization payments and pay down debt. At the end of five years, the company should be in a good position in terms of leverage, said Wehrman. Rumpke will then have the ability to pay down additional debt or go into some kind of growth or acquisition mode, he added.