Zep Inc. announced that it successfully refinanced its credit facility consisting of a new $75 million term loan and a $250 million revolving loan maturing in August 2019. According to an 8-K filing, Bank of America is serving as adminstrative agent on the company's new five-year $325 million facility comrpised of a $250 million revolving loan facility and a $75 million term loan facility.
The following is an excerpt form Zep's 8-K filing:
On August 21, 2014, Zep Inc. (the “Company”) and certain of its subsidiaries entered into a $325 million five-year senior, secured credit facility (the “Credit Agreement”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, KeyBank, National Association and SunTrust Bank, as Co-Syndication Agents, BMO Harris Bank, N.A. and Compass Bank, as Co-Documentation Agents, and the other lenders party thereto (collectively, the “Lenders”). The Credit Agreement is comprised of a revolving loan facility that provides for advances in the initial aggregate principal amount of up to $250 million and a term loan to the Company, in the initial aggregate principal amount of $75 million (the “Term Loan,” and together with the revolving loan facility, the “Credit Facility”). Subject to certain terms and conditions contained in the Credit Agreement, the Company may, at its option and subject to customary conditions, request an increase in the aggregate principal amount available under the Credit Facility by an additional $100 million. The Credit Agreement permits the issuance of letters of credit and swingline loans.
The Credit Agreement is guaranteed by certain of the Company’s domestic subsidiaries (the “Guarantors”). Pursuant to the Credit Agreement, the Guarantors guarantee to the Lenders, among other things, all of the obligations of the Company and each other Guarantor under the Credit Agreement. Borrowings under the Credit Agreement are secured by substantially all of the Company’s and each Guarantor’s owned real and personal property.
Generally, amounts outstanding under the Credit Facility bear interest at a “Base Rate” or a Eurocurrency Rate (as defined below). Base Rate advances are denominated in U.S. Dollars, and amounts outstanding bear interest at a rate per annum equal to the sum of (i) the greater of (A) Bank of America’s prime rate, (B) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System plus 0.5% or (C) the Eurocurrency Rate for a one month interest period plus 1%, and (ii) an applicable margin that ranges from 0.75% to 2.00% based upon the Company’s leverage ratio. Eurocurrency Rate advances can be denominated in a variety of currencies, including U.S. Dollars, and amounts outstanding bear interest at a rate based upon the London interbank offered rate for the interest period, plus an applicable margin that ranges from 1.75% to 3.00% based upon the Company’s leverage ratio (plus any mandatory costs) (the “Eurocurrency Rate”). Under the terms of the Credit Agreement, accrued interest on each loan is payable in arrears on the applicable interest payment date for each loan. Principal repayments on the Term Loan are to be paid quarterly beginning on November 30, 2014 in such amounts as set forth in the Credit Agreement. The Credit Facility is scheduled to mature on August 21, 2019, at which time all amounts outstanding thereunder will be due and payable.
The Company is required to pay certain fees in connection with the Credit Facility, including an annual commitment fee equal to the product of the amount of the available revolving commitments under the Credit Agreement multiplied by a percentage that ranges from 0.25% to 0.5% depending upon the Company’s leverage ratio, as well as customary administrative fees.
The Credit Agreement replaces the Company’s 5-Year Revolving Credit Agreement, dated as of July 15, 2010 among the Company, Acuity Specialty Products, Inc., certain other subsidiaries of the Company, and JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Regions Bank and the other lenders party thereto, as lenders, which was due to expire on July 15, 2015 (the “Existing Credit Agreement”).
“I am very pleased that we were able to refinance our credit facility at better rates and with more flexible debt covenants,” said John K. Morgan, Chairman, President and Chief Executive Officer of Zep Inc. “Our first priority is to generate cash to pay down our existing debt balance and this new facility will provide the strategic financial flexibility necessary to invest in the business while we continue to recover from the fire at our aerosol manufacturing plant,” continued Morgan.
Zep Inc., with fiscal year 2013 net sales of approximately $690 million, is a leading consumable chemical packaged goods company selling a wide variety of high-performance chemicals that help professionals and prosumers clean, maintain and protect their assets.