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Compass Diversified Secures New Debt Financing

Zacks Equity Research

Diversified conglomerate Compass Diversified Holdings (CODI) recently secured a new debt financing from a consortium of financial institutions to increase its liquidity and extend debt maturity at attractive rates. The $725-million debt financing comprised a revolving credit facility totaling $400 million and a term loan facility worth $325 million.

The 5-year revolving credit facility bears an interest at LIBOR plus a margin ranging from 2.00% to 2.75%, based on a leverage ratio defined in the credit agreement. On the other hand, the 7-year term loan facility bears an interest at LIBOR plus a margin of 3.25% and requires quarterly payments of approximately $0.81 million.

Compass Diversified utilized about $280 million of the new term loan facility to repay outstanding debt under the erstwhile revolving credit facility. Consequently, the company has full availability under its new credit facility, with which it expects to fund potential acquisitions or boost its working capital requirements.

The refurbished debt financing transaction extended the debt maturity of the revolving credit facility and term loan to Jun 2019 and Jun 2021, respectively, at favorable terms and pricing conditions. The transaction also increased its overall debt capacity to provide additional liquidity to aggressively pursue organic and inorganic growth opportunities. The debt refinancing further strengthened its banking relationships with premier financial firms like Bank of America Merrill Lynch, the corporate and investment banking division of Bank of America Corporation (BAC).

Headquartered in North America, Compass Diversified is engaged in acquiring controlling stakes in small to middle market companies. The company seeks to invest in industries such as manufacturing, distribution, consumer products and business services.

Compass Diversified currently has a Zacks Rank #2 (Buy). Other stocks in the industry that are worth looking into now include Carlisle Companies Incorporated (CSL) and ITT Corporation (ITT), both carrying a comparable Zacks Rank #2 (Buy).

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