Georgia Gulf has eased its covenant ratios to allow itself greater flexibility during an uncertain economy. "As we look forward, we are uncertain as to the speed of the [economic] recovery," said Richard Marchese, cfo. Marchese noted that the current market environment was responsible for the timing and completion of the amendment.
The Atlanta-based chemical company was able to ease its debt-to-EBITDA ratio from 4.75 times to five times until the end of September and from 4.25 times to 4.75 times until the end of 2002. The company also will have until October 2003, rather than the beginning of 2003, to reduce its leverage ratio to 3.5 times. Similarly, Georgia Gulf's debt coverage ratio was relaxed, and the company will not have to meet a coverage ratio of three times until March of 2003 rather than at the end of 2002.
With the new amendment, Georgia Gulf also reduced its borrowing costs, extended maturities and eased its amortization schedule, Marchese said. To accomplish this feat, the company rolled its existing term loan "B" and term loan "A" into one new "C" tranche. The two existing term loans had been reduced since the credit was completed in 1999, and the combined amount outstanding comprises the new $250 million loan. The new "C" piece is priced at LIBOR plus 21/ 2% and expires in May 2009.
The credit originally provided for a six-year, $100 million revolver, a six-year, $225 million "A" term loan and a seven-year, $200 million "B" loan. All of the tranches were priced against a leveraged-based grid and were set at LIBOR plus 3%. J.P. Morgan, Georgia Gulf's relationship bank, leads the credit.