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Headwaters signs term sheet for asset-based loan to replace revolver
By Jennifer Lanning Drey
Portland, Ore., Aug. 4 - Headwaters Inc. signed a term sheet with a major bank that has agreed to arrange an asset-based loan to replace its current revolving credit facility, which matures on Sept. 9, Steven Stewart, chief financial officer of Headwaters, said Tuesday during the company's third-quarter earnings conference call.
The company said completion of the new asset-based loan is expected by the end of August and represents the next step in its balance sheet restructuring.
During the call, Stewart said the asset-based facility has a minimum size of $50 million and a maximum of $70 million and will be collateralized by a first-lien secured interest in the inventory and receivables of the building materials segment and the receivables of the resources segment.
The maturity date cannot be earlier than the maturity of Headwaters' senior debt.
Reducing maturities
Headwaters also has several additional activities underway aimed at reducing its 2011 and 2012 debt maturities by $100 million, Stewart said Tuesday.
Specifically, the company working to implement additional cost reductions, carry out asset sales and exchange debt for equity or complete other financings, he said.
Headwaters has identified assets with a book value in excess of $100 million that could be candidates for sale transactions, he said.
In addition, the company is pursuing a possible sale-leaseback transaction that could be used to refinance some of the 2011 and 2012 debt maturities or to reduce the revolving credit facility balance, he said.
In July, the company completed the exchange of approximately $35 million of convertible debt that would have otherwise been repayable in 2011 and 2012.
"We believe that these activities will provide us with the ability to repay the revolving credit facility prior to its maturity and will provide our necessary liquidity going forward," Stewart said.
Headwaters had total indebtedness of $530.7 million at June 30.
The company said it expects cash flow from operations, the impact of the asset-based facility and the benefits of cost reductions to allow it to remain in compliance with its senior debt covenants.
Headwaters posted net income of $11.3 million for the third quarter on revenues of $175.2 million. The figures compared with net income of $13.7 million in the same period of 2008 on revenues of $230.5 million.
Headwaters is a South Jordan, Utah-based provider of products, technologies and services to building products, coal combustion products and energy industries.
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