General Cable has amended its secured credit facility to stave off covenant violations due to lower earnings and to increase flexibility in a tough environment, according to Christopher Virgulak, cfo. Virgulak explained that communications sales make up one-third of the wire and cable manufacturer's business, and the present downturn has left it in danger of violating leverage covenants.
The agreement now limits the leverage ratio to 6.5 times EBITDA, but multiples can reach as high as nine times given different quarterly requirements, Virgulak said, noting that the company's fourth quarter leverage ratios are compliant with these terms. The amendment also includes changes in interest coverage ratio requirements and a new covenant adopting minimum quarterly EBITDA amounts.
Furthermore, the amendment reduced General Cable's six-year revolver from $250 million to $200 million, Virgulak noted, adding that the company's banks were looking to lessen their commitment levels on the line. The size of the six-year, $65 million "A" term loan and eight-year, $275 million "B" term loan did not change, although pricing was raised on all three pieces of the facility. The revolver and "A" piece flexed up from LIBOR plus 31/ 2% to LIBOR plus 41/ 2%, while the "B" tranche increased from LIBOR plus 4% to LIBOR plus 5%.
J.P. Morgan leads the facility, in conjunction with agents PNC Bank, BANK ONE and Merrill Lynch. Virgulak said the Highland Heights, Ky., company was pleased that it was able to achieve full lender approval of the amendment. "At the end of the day, it was a good outcome," he added.