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Hutchinson Technology Inc. Message Board

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  • normanrob17111 normanrob17111 Sep 22, 2011 11:06 AM Flag

    Revolving Credit

    Unifi, u seem to really have a grasp on this, so, how does this tie in with the previous refi they offered. Seems to me they are expanding their liquidity or am I reading this wrong? I am assuming they had a good quarter which they have not yet reported with good cash flow (obviously amount unknown).

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    • I believe you are correct, that the purpose of this credit facility is to improve HTI's financial flexibility. In the Q&A portion of the 1st qtr conference call, someone from HTI (probably the CFO) gave the following answer to a question about how much cash HTI needed to operate. "From a cash balance you know we’d like to think closer to $75 million as a cash balance. You can certainly run from below $50 and operate the business (Rich), but we’d like to stay closer to $75. We’re really going to stay away from talking about anything related to debt or financing until after the offer is over."

      HTI has been running below the 75M, so the credit facility fits in that respect. Also, in the last conference call the CFO responded to a question on the amount of outstanding debt that was puttable in Jan. 2013 by stating - And so we expect that we'll likely finance a portion of that, but we also at this point are looking to more focus on our performance and improve the financial and we are not aggressively pursuing additional financing in the near term. This statement would seem to also indicate that the credit facility is likely just a move to increase financial flexibility and not related to an attempt to finance some of the outstanding 3.25% bonds. Reading deeply between the lines of that statement also gives me hope that HTI believes it is going to make a profit in 2012 and use it to buy back at least some of its outstanding debt.

      • 1 Reply to unifihitch
      • If I read it right, the terms of the LOC specifically call for a drawdown of outstanding 3.25% notes, so I think the point of this is, at least in part, to fund the notes.

        Since they are putable in 2013, I think we should really look at the notes as a working capital issue, anyway, so the difference between buying them up on the market or not isn't really substantial. I think this is about having working capital in 2013, for the brief period of time where it might be lower than their target levels before free cash flow fully builds it back up.

 
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