Dal-Tile closed a $400 million refinancing deal in late October, securing a smaller deal and eliminating its "B" tranche. "We're paying down our debt fast. We used a term A and a revolver because it gives us flexibility to pay down our debt," said Chris Wellborn, cfo. "A 'B' tranche is longer term; you pay more to have it sit there. We didn't need the long-term financing." The new credit breaks down into a $125 million "A" term loan, a $200 million revolver, and a $75 million accounts receivable securitization. "We wanted flexibility and we wanted financing to fund organic growth of the business," said Wellborn. Dal-Tile, based in Dallas, is a manufacturer, distributor and marketer of ceramic tile.
The deal was oversubscribed, but Wellborn declined to reveal by how much. The original deal was $525 million. "In 1995-96, the company had a lot of debt and banks put restrictive covenants on it," said Wellborn. "The company turned around in 1997 with new management and paid down much of its debt." In return for higher cash flow and the pay down, the company gained flexibility to make acquisitions and the capability to buy back its stock. Wellborn said the absence of a "B" tranche makes pricing on the new deal comparable to pricing on the previous deal, but he declined to give specifics. The refinanced deal expires in 2006. The company went out to bid, but ended up awarding the deal to original lender J.P. Morgan due to its existing relationship. "They had done a great job with us in the past," said Wellborn.