Manufacturers' Services Limited (MSL) has sealed a three-year, $100 million revolver and a $10.5 million term loan with lower interest costs, after slimming down its balance sheet and switching from a cash-flow deal to an asset-based facility. "The catalyst to the refinancing was that the old facilities were making less sense as MSL downsized its balance sheet," said Sean Lannan, treasurer. "The old facility was too large and inflexible in terms of international requirements."
The Concord, Mass., company previously had a $175 million revolver and an $85 million term loan with spreads of 4% and 5% over LIBOR, respectively. "The interest spread when we paid off $73 million of the term loan was running at 71/ 2%," Lannan said. Pricing on the new facility, however, is LIBOR plus 31/ 4%. He noted that MSL is benefiting from the overall decline in interest rates, as well as the company's reduced leverage. Banc of America Securities and Credit Suisse First Boston co-led both the old and new facilities.
MSL is a provider of supply chain services to original equipment manufacturers, a space that has had a difficult run in the last couple of years. To reflect the reduced demand for services over the past year, the company aggressively pruned its balance sheet, Lannan said, adding that its $320 million accounts receivable facility has been halved and inventories have been reduced. Additionally, MSL netted $37.8 million through offerings of equity and convertibles in March. Original equipment manufacturers cannot run a leveraged balance sheet due to steep cycles, he noted, citing the difficulties encountered by ACT and Flextronics International.