Cone Mills Corporation, a denim fabric producer based in Greensboro, N.C., was able to extend its credit facility by downsizing the deal and accepting a new structure pitched by lead bank Bank of America.Scott Wenhold, v.p. and treasurer, said the company's new $68 million facility will replace its existing $73 million facility. "The structuring of the facility is quite different and it benefits both of us. Banks want to reduce credit exposure to the company and from our standpoint things won't get better until we pay down debt and restructure our balance sheet," said Wenhold.
Wenhold attributed a balk by banks at the company's credit to problems related to the textile sector, which is out of favor with the capital markets, he said. As part of the new structure on the deal, the credit has a slightly longer maturity, expiring in January 2003, compared to the old 364-day deal. Wenhold described the credit as a reducing revolver, explaining that as the company sells assets in the future it will take proceeds to reduce debt, diminishing banks' current commitments. He said there is a schedule of amortization payments so that the company needs to pay $10 million by January 2003 to lenders, of which 70% will pay off bank debt and 10% will pay off outstanding bondholders holding $27 million in senior notes. Wenhold said the extension didn't come at a cheap price now that the market's interest in the company has changed considerably since the deal was first signed. Wenhold declined to give the new pricing, but said a 200 basis points hike is in place.