ITASCA, IL — Midas has signed a new five-year credit agreement with its existing bank group for an unsecured $110 million revolving credit facility.
The new facility includes a $30 million accordion feature which allows the company to increase the facility to $140 million. The lending group is led by JP Morgan Chase Bank and includes National City Bank, LaSalle National Bank, Bank of America and Harris Bank. The new facility replaces a three-year, $115 million secured credit facility, in place since March 2004, which consisted of a $55 million revolving loan and an initial $60 million term loan.
The new agreement lowers Midas’ borrowing cost by an average of 35 basis points (BPS) over the rates of the former facility. The new revolver is initially priced at LIBOR plus 200 BPS with future pricing based on the company’s leverage.
“The new facility lowers our future interest cost and provides more flexibility for actions such as share repurchase,” said William Guzik, Midas’ senior vice president and CFO. “Importantly, the new facility is unsecured. Previously, the lenders held mortgages on the real estate sites we lease to franchisees.
“With the new unsecured facility, our lenders are demonstrating their confidence in the growing financial strength of the company as a result of our transformation out of wholesale distribution over the past three years to focus on the profitable franchise retail business,” he said.
Guzik said the company expects to take a non-cash charge of approximately $700,000 in the fourth quarter related to the early retirement of the old credit facility.
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