The Pantry Reprices Debt
Financial move to provide significant reduction in expenses
SANFORD, N.C. -- The Pantry Inc. has completed a repricing and renegotiation of certain terms of its senior secured credit facilities with the goal of significantly cutting interest costs and annual payments. The facilities include a term loan with a remaining balance of $205 million, as well as a $150 million revolving credit facility.
As previously disclosed, the Sanford, N.C.-based company used approximately $100 million of the proceeds from its recent convertible debt offering to reduce the amount of its outstanding term loan. Under the revised [image-nocss] credit agreement, the interest rate spread was reduced by 50 basis points on the term loan and by 100 basis points on the revolving credit facility (if and when utilized). The size of the revolver was also increased by $80 million, to $150 million.
The term of the credit facilities was extended to January 2012, and required annual principal repayments were reduced from $16 million to $2 million. The company will incur a $1.9 million pre-tax charge in its first fiscal quarter in connection with the refinancing of its term loan. As a result, the expected net impact on fiscal 2006 earnings is neutral, while the benefit in future years from reduced interest expense is expected to be $0.05-$0.06 per share, according to the company.
Peter J. Sodini, president and CEO of The Pantry, said, "We are pleased to complete this renegotiation and the overall restructuring of our debt, including last month's convertible note offering. The amendments to our credit agreement provide for significant reductions in both our interest expense and required principal payments. The combination increases our projected free cash flow and enhances our financial flexibility to take advantage of future acquisition opportunities as they arise."
The Pantry Inc. is one of the largest independently operated convenience store chains in the country, with net sales for fiscal 2005 of approximately $4.4 billion. As of September 29, 2005, the company operated 1,400 stores in eleven states under a number of banners.