TVL is doing a $125M Term loan and $75M revolver to take out a portion of the 6 1/2 of 2013. They are setting up the capital structure to do a $250M bond deal to take out the rest of the 2013. Don't have to pay a premium, callable at par. I expect a bond deal to be announced soon, this is usually how things work, Bank then Bonds.
Looks like immediate action is to reduce outstanding debt by at least $30 million ($155 million bonds redeemed minus $125 million new bank term loan) (not touching $75 million revolver yet)............that alone saves $30 million at 6.5% interest or $2.1 million pre-tax a year. Looks like the new bank term loan for 6 years is at less than 3.5% based on current LIBOR. That means they save another 3.0% X $125 million or another $3.75 million a year. That alone is $5.85 million total more in earnings pre-tax from this point forward (11-25-11 to be exact). That's more than 11 cents EPS pre-tax gain per year......WOW. This alone should rock the stock. How do you know about a $250 million bond issue? I don't see where they need but less than $200 million? DaninFW
I'm just guessing on the bond deal. I don't think it's a coincidence they are leaving $250M outstanding. $250M is usually the minimal size of a HY bond, so it kind of fits. They don't have to do it. They could continue to use FCF and take out the bonds whenever they want, but that isn't a normal way to manage your capital structure. I work in High Yield, so I know how this works. The bigger deal is that once they clean up the $250M they now have a huge runway of nothing but cash generation and nothing to do with it. This is the first step from changing from debt pay down mode to acquisition/returning value to shareholders mode. Great news for shareholders.