ESCO Technologies gets new $450 million five-year revolver

By Toni Weeks

San Diego, May 18 - ESCO Technologies Inc. entered into an agreement for a new $450 million five-year revolving credit facility on Monday, and, at the same time, terminated its previous $330 million credit agreement due Nov. 30, 2012 with PNC Bank NA, according to an 8-K filing with the Securities and Exchange Commission on Friday.

The administrative agent for the new revolver is JPMorgan Chase Bank, NA. PNC Bank is the syndication agent. SunTrust Bank, Wells Fargo Bank, NA and Bank of America, NA are co-documentation agents. Five other lenders are participating in the facility.

ESCO may increase the size of the facility by entering into incremental term loans in any agreed currency. The incremental term loans must be for at least $25 million each, up to an aggregate amount of $250 million.

ESCO and some of its foreign subsidiaries may draw loans on the credit facility.

The company and its subsidiaries also may from time to time request the issuance of letters of credit under the facility, subject to some limits and restrictions. Letters of credit issued on behalf of subsidiaries will be guaranteed by the company. Under the $450 million revolver, dollar-equivalent loans and letters of credit are limited to $75 million.

Interest is Libor plus a spread of 82.5 basis points to 165 bps depending on the company's leverage ratio. The facility fee rate ranges from 17.5 bps to 35 bps, also depending on the leverage ratio.

The credit facility includes various restrictions, including the ability of ESCO or its subsidiaries to incur debt or grant liens upon their assets. It also prohibits some consolidations, mergers and sales and transfers of assets.

ESCO may not permit the interest coverage ratio of consolidated EBITDA to consolidated interest expenses, as measured on a rolling four-quarter basis, to be less than 3.00 to 1.00. In addition, the company may not permit the leverage ratio of consolidated total debt to consolidated EBITDA, as measured on a rolling four-quarter basis, to be greater than 3.50 to 1.00. It may, however, activate a temporary leverage ratio step-up to 3.75 to 1.00 for four consecutive fiscal quarters if the step-up is in connection with a permitted acquisition of more than $100 million.

The credit facility is secured by the unlimited guaranty of the company's U.S. subsidiaries and through the pledge of 65% of the share equity of each of ESCO's material foreign subsidiaries.

As of Tuesday, about $143 million of borrowings were outstanding under the credit facility, the filing noted.

Besides refinancing the previous debt, proceeds will be used to finance capital expenditures, permitted acquisitions and/or permitted repurchases of outstanding capital stock and for corporate purposes and working capital.

St. Louis-based ESCO designs and manufactures filtration and fluid flow products, develops technologies to enhance utility performance and provides products for the detection, measurement and management of electromagnetic, magnetic and acoustic energy.

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