K-Sea Transportation amends revolver to lower size, change covenants

By Sara Rosenberg

New York, Sept. 2 - K-Sea Transportation Partners LP has entered into a revolving credit facility amendment agreement, under which size will be reduced to $115 million from $175 million and financial covenants will be revised, according to an 8-K filed with the Securities and Exchange Commission on Thursday.

Covenants that are being changed include the fixed-charge coverage, total funded debt to EBITDA and asset coverage requirements.

The minimum fixed-charge coverage ratio will decrease from 1.50 to 1.00 to 0.75 to 1.00 for the fiscal quarter ended June 30, 0.50 to 1.00 through Dec. 31, 0.60 to 1.00 through June 30, 2011, 0.70 to 1.00 through Dec. 31, 2011, 0.75 to 1.00 through March 31, 2012, and 1.05 to 1.00 through June 30, 2012 and thereafter.

The amended ratio of total funded debt to EBITDA may not exceed 6.50 to 1.00 for the fiscal quarter ended June 30, 6.90 to 1.00 through Dec. 31, 6.75 to 1.00 through March 31, 2011, 6.50 to 1.00 through June 30, 2011, 5.75 to 1.00 through Sept, 30, 2011, 5.20 to 1.00 through Dec. 31, 2011, 4.85 to 1.00 through March 31, 2012, and 4.40 to 1.00 through June 30, 2012 and thereafter.

In addition, the amendment will allow the company to pay distributions starting with the fiscal quarter ending March 31 and subject to certain minimum financial ratios.

Pricing on the amended revolver can range from Libor plus 275 basis points to 575 bps, and the commitment fee can range from 37.5 bps to 87.5 bps, based on total debt to EBITDA.

Currently, the top tier on the pricing grid occurs when the total debt to EBITDA is greater than 6.00 times. However, beginning on Jan. 1, 2011, if the ratio is greater than 6.00 times, pricing will increase by an additional 50 bps and will continue to increase by another 50 bps for each fiscal quarter thereafter until the ratio moves below 6.00 times.

KeyBank is the administrative agent on the revolver, and the amendment agreement was entered into on Aug. 31.

Additionally, K-Sea entered into an amendment agreement for its term loan to revise financial covenants and pricing to conform to the revolver terms and provide for a 50 bps amendment fee.

DnB NOR Bank is the lead on the term loan and this agreement was entered into on Sept. 1.

The amendments will become effective upon the completion of an $85 million investment from KA First Reserve LLC, which is expected in early September.

KA First Reserve is also planning on investing an additional $15 million in the company within 30 days following clearance of Hart-Scott-Rodino review.

In return for the investment, KA First Reserve will get 18.4 million convertible preferred units.

Proceeds from the investment will be used to reduce outstanding debt. After the paydown, the company's total funded debt as of Sept. 1 was $279.2 million on a pro forma basis, which represents a ratio of funded debt to EBITDA of 4.3 times.

K-Sea is an East Brunswick, N.J.-based coastwise tank barge operator.

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