Bell Microproducts, Inc. recently signed a $175 million credit facility to pay down notes that are maturing next month and raise working capital for potential acquisitions. The facility expires in two years. Eli Sayegh, director of investor relations, said bank debt financing offered the most flexibility for the company. "We've been working on this for months. The one-year notes were due at the end of June, and we wanted to get this over ahead of that," he said. "Equity was out of the question; stock is too cheap at this level. This made the most sense. It gives us flexibility to tap into this as needs came up."
Sayegh noted the credit facility is cheaper and more flexible than bonds. "As the need arises, we can tap the line," he said. The company will use the credit facility to pay off an $80 million 9 1/8 % note with the Retirement System of Alabama. Bell Microproducts, based in San Jose, Calif., offers services such as testing, software loading, mass storage system integration and computer system integration. Last week the company announced the acquisition of Touch the Progress, a high-end data storage company.
First Union National Bank and Congress Financial Corp. are the lead arrangers. Sayegh says the company did go out to bid. "[The leads] had the right combination of a good rate, and their package made the most sense to us," he said. The new deal replaces a $50 million U.S. facility that was due to expire on May 31 and a $15 million Latin America facility that was to expire on June 30.