Kratos Defense & Security Solutions refinanced its outstanding $90 million Revolving Credit Facility and $300 million 6.5% Senior Secured Notes, with a new 5-year $200 million Revolving Credit Facility and 5-year $200 million Term Loan A (collectively, the “New Credit Facility”). The Company has drawn approximately $200 million under the Term Loan A and $100 million on the new Revolving Credit Facility, with $100 million remaining in borrowing capacity. Mandatory amortization on the Term Loan A is 2.5% in each of the first and second years and 5.0% in each of the third, fourth and fifth years, with the remaining outstanding balance due at maturity. Based on the current borrowing rates under the New Credit Facility and the current amount drawn, the Company expects to save approximately $10 to $13 million in cash interest payments annually. The redemption of the Company’s outstanding $300 million 6.5% Senior Secured Notes due November 2025 is expected to close on March 14, 2022 (the “Redemption Date”), for an amount of cash equal to 103.25% of the principal amount thereof plus accrued and unpaid interest thereon to, but excluding, the Redemption Date (the “Redemption Offer”).
As a result of the refinancing of the Company’s existing 6.5% Senior Notes and the existing Revolving Credit Facility, the Company expects to record one-time charges of approximately $13 to $15 million in its fiscal first quarter, comprised of the 3.25% call premium and the write-off of the deferred financing costs associated with the original financing transactions.
Truist Securities, Inc. was the lead arranger for Kratos’ new credit facility.
Deanna Lund, Kratos’ Executive Vice President and Chief Financial Officer, said, “The cost of this refinancing including the call premium is expected to be recouped in approximately 12 months, with expected savings of approximately $10 to $13 million in cash interest payments annually, based on current interest rates and the amount currently drawn. This refinancing further positions Kratos to remain focused internally – on executing our strategic plan and continuing to make targeted investments to organically grow the business.”
Eric DeMarco, President and CEO of Kratos, said, “Kratos’ mission is to rapidly develop and deliver the right products and systems at an affordable cost to our customers, which we believe is a winning business model for all of our stakeholders. This successful refinancing by Deanna and her team is an incredibly positive event for the entire Kratos enterprise.”