Rush Enterprises gets $600 million revolving loans to finance vehicles

By Susanna Moon

Chicago, Feb. 2 - Rush Enterprises, Inc. said its lenders agreed to extend up to $600 million of revolving credit loans under an amended and restated credit agreement to finance its purchase of new and used vehicle inventory and to finance its working capital needs.

The revolving credit loans consist of $500 million of revolving A loans and $100 million of revolving B loans. The revolving B loans cannot be made unless there is no more availability for revolving A loans.

Interest is Libor plus 223 basis points for revolving A loans and Libor plus 295 bps for revolving B loans. The monthly working capital fee is 35% per year of voluntary prepayments of new and used inventory loans. The delinquency charge on late payments is 1.5% per month or, at the option of the agent, 5% of the past due amount.

Loans to purchase used inventory are limited to $125 million.

The company and substantially all of its subsidiaries amended the credit agreement Tuesday with General Electric Capital Corp. as administrative agent and collateral agent, according to an 8-K filing with the Securities and Exchange Commission.

Agreement details

The company is obligated to use the proceeds from the sale of inventory to repay any loan to finance the inventory unless the company sells vehicles and finances the purchase of the inventory by its customer.

In addition, for each vehicle inventory loan that remains outstanding more than 12 months, the company must repay a percentage of the loans.

The company may voluntarily prepay (i) inventory loans at any time, provided that (A) prepayments cannot exceed the sum of 38% of the inventory loans made as revolving A loans and swing loans plus 100% of the inventory loans made as revolving B loans and (B) no revolving A loans and swing loans may be prepaid in whole or in part if any revolving B loans are outstanding and (ii) working capital loans at any time.

The credit agreement expires Jan. 31, 2015, but the agent may terminate the agreement at any time with 120 days' written notice. The company may terminate the agreement at any time with a prepayment processing fee of $12 million if terminated before Oct. 31, 2013 and $300,000 if terminated after that, subject to specified limited exceptions.

Covenant terms

Covenants require the company to maintain a ratio of consolidated total liabilities to total net worth of no more than 2.5 times and a ratio of consolidated adjusted EBITDAR to consolidated fixed charges of at least 1.2 times.

The company's consolidated tangible net worth cannot be less than (i) $225 million on or prior to Dec. 31 and (ii) after that, the sum of (a) the minimum consolidated tangible net worth for the prior quarter plus (b) 50% of the company's net income for the quarter being measured (or $0 if the company has a net loss for such quarter).

The company's consolidated net worth cannot be less than (i) $375 million on or prior to Sept. 30, 2010 and (ii) thereafter the sum of (a) the minimum consolidated net worth for the prior quarter plus (b) 50% of the company's net income for the quarter being measured (or $0 if the company has a net loss for such quarter).

Temporary revolver bump

Rush said last month that it amended its revolver on Dec. 29, temporarily increasing GE Capital's loan commitment by $50 million. As a result, the overall size of the facility was increased to $500 million from $450 million.

GE Capital is a lender and the administrative agent. Following the increase, its loan commitments under the facility were $350 million, according to a previous 8-K filing with the SEC.

After 2 p.m. on Jan. 12, GE Capital's loan commitment was to fall back to $300 million and the total size was to fall back to $450 million, and any borrowings in excess of $450 million were to be immediately repaid.

The company previously said it financed substantially all of its commercial vehicle inventory under the facility. The company entered into the amendment to finance additional commercial vehicle inventory at year's end.

Rush Enterprises owns and operates a network of commercial vehicle dealerships. It is based in New Braunfels, Texas.

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