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U.S. Xpress Enterprises Inc. (NYSE: USX) announced that it entered into a new revolving credit facility and paid off outstanding balances on its prior revolver in a press release issued after the market close today.
The refinancing establishes a new $250 million credit line along with a feature that provides an additional $75 million in borrowing capacity. The facility also provides a $25 million swingline subfacility — typically short-term financing to facilitate payments of existing debt.
Proceeds from the new facility, along with approximately $100 million in tractor and real estate financings, were used to pay off the prior outstanding balance on the company's previous revolving facility.
The press release said the new facility will provide increased flexibility and lower the company's interest rates. The refinancing is expected to provide more than $100 million in borrowing capacity following post-closing activities.
"We appreciate the continued support from our lenders, with Bank of America, JP Morgan Chase Bank, Wells Fargo Bank, and Regions Bank all remaining in our bank group. The refinancing will support several of our goals including improved pricing, the ability to grow our borrowing base with the business, and adding flexibility to execute our plan to convert a significant portion of our fleet from operating lease financing to owned financing over time, to optimize our tax and trade-in positions," said U.S. Xpress' chief financial officer, Eric Peterson.
The broader terms of the new financing provide an interest rate of London Interbank Offered Rate (Libor) plus 1.25-1.75%, depending on the amount outstanding.
According to the company's 8-k filed with the Securities and Exchange Commission, base rate loans will accrue interest at the highest of the Federal Funds Rate plus a margin of 0.5%, the agent's prime rate or Libor plus 1%, plus an additional margin of 0.25-0.75% after the set margin of 0.5% expires at the end of June. Base rate lending on the prior facility accrued interest at the agent's prime rate plus a margin of 0.75% and 1.5%.
Eurodollar rate loans will accrue interest at Libor plus 1.25-1.75% after the set margin of 1.5% expires at the end of June. The old facility had an established rate of Libor plus 1.75-2.5%.
Additionally, the letter of credit fee and margin charged declined 1% compared to the prior facility.
The new facility has only one financial covenant, a fixed charge coverage ratio — a company's ability to cover debt, interest and lease expenses in relation to its earnings before interest and taxes (EBIT) — of at least 1.
U.S. Xpress expects to record a $500,000 noncash write-off for deferred financing costs as well as approximately $200,000 in new financing costs during first-quarter 2020.
The new five-year credit facility terminates on Jan. 28, 2025.
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