MANKATO, Minn. -- (BUSINESS WIRE) -- HickoryTech Corporation (NASDAQ:HTCO), doing business as Enventis, announced today the closing of its debt refinancing agreement for an aggregate credit facility of $165 million. The amended credit facility offers HickoryTech access to extended financing through 2019 to deploy capital in pursuit of its strategic growth initiatives.
"We are very pleased with the terms and cost of this refinancing, which will replace our existing debt and provide additional capacity and flexibility to allow us to continue our growth strategy over the next several years,” said David Christensen, senior vice president and chief financial officer. “This refinancing demonstrates the continued confidence our lenders have in our business model and further strengthens our long-term capital structure.”
Credit Agreement Details
The debt refinancing is in the form of an amendment to the company’s existing agreements. It includes the issuance of $135.3 million in secured term loans and a $30 million secured revolving credit facility, which has no outstanding debt or usage at this time. The term loans are structured in a Term Loan B facility, and are combined in the same credit agreement with the revolving credit facility.
Borrowings under the new credit agreement will bear interest at the company's election based on LIBOR or a base rate plus an applicable margin related to the company's leverage ratio. At the company’s current leverage ratio, the applicable margin will be 2.75 percent for LIBOR loans and there is no LIBOR floor amount.
The company is required to make quarterly amortization payments of $338,000 on the Term Loan B facility. The company has $135.3 million outstanding debt on October 30, 2013. All amounts outstanding on the revolving loan facility and Term Loan B facility will be due on Dec. 31, 2019.
This credit agreement includes new allowances for continued payment of HickoryTech dividends and common stock repurchases. The agreement also has been designed to provide incremental financing for business acquisitions that fit the company’s strategic plans.
As a result of the refinancing, HickoryTech will incur certain fees, as well as direct and incremental third-party costs of approximately $1.3 million to $1.4 million. These costs will largely be capitalized and amortized over the remaining six years of the agreements.
The credit facility is secured by substantially all HickoryTech assets. It includes financial covenants which require HickoryTech to maintain a leverage ratio of less than 3.5 to 1.0, with gradual declines in this ratio after 2014, and a debt service coverage ratio of greater than 2.5 to 1.0.
"With a current leverage ratio of approximately 2.9 times EBITDA, our relatively low levels of debt provide us with significant flexibility as we execute our business plan,” said Christensen. "We continue to see growth opportunities with our fiber and business services as we focus on generating sustainable free cash flow and creating long-term value for our shareholders."
HickoryTech is a leading regional business and broadband communications provider with an extensive fiber network. The company has grown through strategic acquisitions, including CP Telecom in 2009 and IdeaOne in 2012, as well as organic fiber network expansion including the recent completion of its Greater Minnesota Broadband Collaborative Project.
Recently, the company announced a unified brand, Enventis, which it will market across its entire service area. The company will seek shareholder approval to change the corporate name to Enventis Corporation in 2014.
Participants of the new credit facilities include: CoBank ACB as administrative agent, lead arranger, bookrunner and a lender; Union Bank, N.A. as co-syndication agent and lender; Sun Trust Bank, N.A. as co-syndication agent and lender, Associated Bank, N.A. as lender and four Farm Credit System Institutions as lenders.
The form 8-K with the amended credit agreement will be filed with the Securities and Exchange Commission today and will be available at http://investor.hickorytech.com under Financial Information.
HickoryTech Corporation is a leading communications provider serving business and residential customers in the upper Midwest and is doing business as Enventis. With headquarters in Mankato, Minn., the corporation has 500 employees and an expanded, multi-state fiber network spanning more than 4,100 route miles serving Minnesota, Iowa, North Dakota and South Dakota. The company provides IP-based voice and data solutions, MPLS networking, data center and managed hosted services and communication systems to businesses across a five-state region. The company also offers broadband Internet, Digital TV, voice and data services to businesses and consumers in southern Minnesota and northwest Iowa. The Company trades on the NASDAQ, symbol: HTCO, and is a member of the Russell 2000 Index. For more information, visit www.enventis.com.
Certain statements included in this press release that are not historical facts are "forward-looking statements." Such forward-looking statements are based on current expectations, estimates and projections about the industry in which HickoryTech operates and management's beliefs and assumptions. The forward-looking statements are subject to uncertainties. These statements are not guarantees of future performance and involve certain risks, uncertainties and probabilities. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. HickoryTech undertakes no obligation to update any of its forward-looking statements, except as required by law.