Haverty Furniture Companies has refinanced its bank debt a year before it expired and extended its maturity to avoid violating its current assets versus liabilities covenant. The former $105 million, five-year revolver was set to mature in March 2003, appearing on the balance sheet as a short-term or current liability rather than as a long-term liability, explained Dennis Fink¸ executive v.p. and cfo. "When obligations become due in a year, they are looked at in a different way," he said. "For ratio purposes we didn't want it to show up as current." The company originally planned on the early refinance when it took out the facility in 1998.
The new $125 million credit comprises an $80 million, three and a half-year revolver and a $45 million, 364-day revolver. Haverty originally sought a $110 million credit facility and increased the 364-day revolver in response to oversubscription. "Extra security in choppy times," Fink said of the reasoning behind the increase. The company waited as long as possible to refinance the credit. "The debt markets have been pretty difficult in the last year for middle-market companies in retail. We didn't want to jump out early and find the banks less receptive," he explained. "You are going to have a deal that is going to last for the next couple of years so you want it to be a reasonable deal," he added.
The pricing on the new credit increased about % because the risk premium for corporate debt shot up after June 1998, Fink explained. "We caught the market at a very opportune moment in 1998," he said, noting the low rates and competitive lending environment. SunTrust was the lead arranger and the administration agent. Wachovia Bank was the co-syndication agent and Bank of America was the documentation agent.