Susser Evolving With New Revolving Credit Facility
Will help finance acquisitions, more for "one of most compelling growth stories in c-store industry"
CORPUS CHRISTI, Texas -- In a move that will help drive growth, Susser Holdings Corp. has announced that it has closed on a new $500 million revolving credit facility.
"The surplus capacity on the new lower-cost revolving credit facility will help us execute our plan to drive long-term growth both organically and through acquisitions," said Sam L. Susser, president and CEO of Susser Holdings.
The company also has notified the trustee of its $425 million of 8.5% senior notes due 2016 that it is redeeming the notes effective May 15, 2013.
As reported in a Raymond James/CSP Daily News Flash on Wednesday, Susser plans to initially use approximately $250 million of the capacity under the new credit facility, along with existing cash, to retire the notes, which are callable at a price of 104.25%. Including the $18.1 million call premium and approximately $4 million of transaction expenses, a total of $447 million (plus accrued interest) will be required to retire the notes.
The company expects to recognize a one-time pre-tax charge of approximately $26 million, or 76 cents to 78 cents per diluted share, in connection with the refinancing.
The $500 million revolving credit facility, with a variable interest rate initially set at LIBOR plus 200 basis points, includes an accordion feature that would enable the company to expand it by an additional $100 million, to a total of $600 million, to finance future growth.
The facility expires April 8, 2018. Susser Petroleum Partners LP has a separate $250 million revolving credit facility that also has a $100 million accordion feature.
The company said it expects the refinancing to reduce annual interest expense by $30 million to $32 million
"With the refinancing of our high-yield debt, based on current LIBOR rates, we expect to save an estimated $30 to $32 million of annual pre-tax interest expense, which would add approximately 90 to 95 cents to our diluted earnings per share," Sam Susser said.
Believing that "the company is now poised for faster growth and increased earnings leverage," Bonnie Herzog, managing director for beverage, tobacco and consumer research at Wells Fargo Securities LLC, New York, said, "We had been anticipating this and had outlined it as one of our positive catalysts on [Susser], and we are pleased that it is now going to be an even greater benefit than we had previously expected. This highlights the power of Susser Holdings and the sophistication of the management team to create value for shareholders, and we expect the stock to react favorably."
She added, "Susser is a best-in-class convenience store and foodservice operator and one of the most compelling growth stories in the c-store industry. With a top-tier foodservice franchise in Laredo Taco Co. and a concentrated, but underpenetrated, presence in the dynamic and attractive Texas market, we think Susser has some of the best growth prospects in the convenience store industry."
Herzog said Susser's Stripes convenience stores--and the Laredo Taco Co. brand--"have a stronghold in south Texas, and we expect management will pursue broader in-state expansion over the next three to five years."
And she offered a strong endorsement of the company's current leadership: "We think management, led by CEO Sam L. Susser, is made up of highly capable operators, who run the business with a long-term perspective and can create significant earnings power that is not reflected in current valuation."
Susser Holdings is a third-generation, family-led business based in Corpus Christi, Texas, that operates more than 560 convenience stores in Texas, New Mexico and Oklahoma under the Stripes banner. It also is majority owner and owns the general partner of Susser Petroleum Partners, which distributes more than 1.4 billion gallons of motor fuel annually to Stripes stores, independently operated consignment locations, convenience stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.