Daseke flatbed truck supplier (NASDAQ: DSKE) announced on Wednesday that it had favorably refinanced its term loan. The transaction reduces the outstanding balance, reduces annual interest payments and lengthens the term.
The $484 million loan was repaid at $400 million with available cash and the maturity was extended four years to March 2028. The new loan has an interest rate of LIBOR plus 400 basis points. base, i.e. 100 basis points less than the previous loan. The interest rate floor was also lowered by 25 basis points to a total of 75 basis points.
The lower debt balance and new headline rate will reduce annual interest expense by more than $8 million. Daseke recorded nearly $45 million in interest expense in 2020. The press release says the company’s net debt ratio is estimated at 2.7x.
The transaction closed on Tuesday with JPMorgan Chase Bank (New York Stock Exchange: JPM) as sole bookrunner.
“We are pleased with the improved terms of the new Term Loan B, which have been supported by the business’ improved economic performance and its unique competitive positioning,” Daseke Chief Financial Officer Jason Bates said in a statement. Press. “The execution of our strategic plan over the past six quarters has significantly improved our operational and financial performance and helped us strengthen our balance sheet and significantly improve credit metrics.”
The company before undertook several recovery initiatives aimed at improving margins, increasing cash generation and reducing debt. These efforts included consolidating its network of separately operated rig fleets from 16 to 9, divesting its oil rig transportation segment, disposing of underutilized equipment, downsizing and added to the list of frames.
Daseke’s turnaround is also aided by improving fundamentals in the flat TL market, which has seen capacity tighten and rates rise. Tender rejections by carriers now stand at 15%, almost double the level of a year ago, as industrial activity continues to recover.
The Purchasing Managers’ Index rose 2.1 percentage points in February to 60.8%, the ninth consecutive month the manufacturing indicator was in expansion territory. Industrial production also continues to experience year-over-year declines. In January, the data set rose for the fourth straight time as manufacturing output rose 1% sequentially.
Daseke plans to increase its asset-based revolving facility by $50 million, bringing its total capacity to $150 million. The $84 million debt reduction used up less than half of the company’s $176 million cash balance at year-end.
Along with the refinancing, rating agencies Moody’s and S&P Global raised Daseke’s risk profile.
“The lower cost of debt capital and greater financial flexibility under the new term loan will help meet strategic needs and pursue accretive growth opportunities. We remain committed to continuing the transformation of our business and driving sustainable revenue and profitability growth,” Bates concluded.