Cleveland-based LESCO, a provider of products for the professional turf-care market, has refinanced its debt and secured a $122 million asset-based credit with PNC Bank. "LESCO was in violation of covenants on the old agreement and had forebearance through March," said Breck Denny, cfo of LESCO. "The lousy economy and Sept. 11 caused LESCO to violate," he said. "The primary culprit was a fixed-charge ratio." The company has been working since October to solve the problem with the existing deal, he added.
PNC is a relationship bank that provided the backstop to a receivables' securitization, Denny said. LESCO put it to bid to "test the market," he added. But PNC knew the company better than other lenders from its relationship through the middle-market team. The asset-based lending team and middle-market group both report to William Kosis, ceo of PNC's business credit group.
Previously the company had three lines of credit: a term note to insurance companies worth $45 million; the $50 million asset securitization facility, and a $15 million revolver. The new asset-based facility, split between a $7 million term loan and a $115 million revolver, provides a much greater degree of flexibility and better suits the seasonal nature of the business. The borrowing amount is based on receivables and inventory, which vary depending on the season. The securitization facility is comparably very cheap, but the flexibility and availability is not there, Denny noted. Pricing on the new line is LIBOR plus
2 3/4 % to 3% on the revolver when fully drawn and LIBOR plus 3 1/4 % on the term loan. LESCO paid a prepayment penalty of $3.5 million to the noteholders.