Fleetwood Enterprises closed a $260 million deal late last month to replace notes, pay down other debt, and to finance operating expenses. Boyd Plowman, cfo, says this is the first credit facility of this size for the company, which had used $69 million in long-term notes before the refinancing. "We foresaw some covenant violations, and it came to fruition," Plowman explained, noting that the covenants on the bank deal are less restrictive. The Riverside, Calif.-based company is one of the leading distributors of recreational vehicles and manufactured homes.
Plowman said getting the deal fully funded was challenging in a tight market, especially for a company which is being hit by the slowdown. Pricing is based on a grid and was raised 50 basis points during syndication, said Plowman. The company began to seek out the deal last fall, before the economy took a turn. "The general economy has had a greater impact on the RV business. Customers in this sector are more affluent," he said. "When the stock market began to reverse, it hurt consumer confidence. With the Fed rate being cut, we're beginning to see improvements." He said manufactured housing, which is trailer homes, has also been in a "self-inflicted slump" for the past two years. "It's due to bad loans on the part of lenders. We're beginning to see some modest strength," he explained.
Bank of America leads the deal. The company did go out to bid, and Plowman said the bank's flexibility helped it to secure the lead. There are five banks in the syndicate, and the company is continuing to add new members. "We had to close prior to filling out syndication, and we recently signed off on one more lender. It got easier once we closed, like selling from an empty shelf," Plowman said.