One of the leading distributors of pipes, valves and fittings, MRC Global Inc. (MRC), re-priced and increased its senior secured term loan facility by $150 million. The move will enable the company to reduce borrowing costs.
MRC Global’s move enabled it to reduce the term loan’s annual interest rate by 100 basis points (bps), to London Interbank Offered Rate (LIBOR) plus 400 (bps). Additionally, the LIBOR floor on the same has contracted to 1.00% from 1.25%.
In 2012, the company borrowed the seven-year senior secured Term Loan B facility worth $650 million, set to mature in Nov 2019. As of Sep 30, 2013, MRC Global had an outstanding term loan worth $643.5 million. The company is obligated to repay the term loan utilizing certain asset sales, insurance and debt proceeds along with 50% of excess cash flow.
The total size of the term loan, after the upgrade, is $793.5 million. It was borrowed by MRC Global’s wholly-owned subsidiary McJunkin Red Man Corporation.
In addition to the term loan, the company also has a $1.25 billion multi-currency global asset-based revolving credit facility, scheduled to mature in Mar 2017. MRC Global had funds of $573.0 million available under this credit facility as on Sep 30, 2013.
The company has undertaken the upsizing in a favorable interest environment which complements its strong credit profile. The proceeds will be utilized for acquisitions in the energy business, expanding its global presence.
For MRC Global, whose liquidity, including cash from operating activities, existing cash in hand and revolving credit facility, amounted to $606.0 million as of Sep 30, 2013, the aforementioned moves will help improve its financial flexibility and incur lower cost of capital. Therefore, they are strategic steps for the company to continue with its cost management activities.
MRC Global currently carries a Zacks Rank #3 (Hold). Other stocks in the industry worth considering include Mueller Water Products, Inc. (MWA), Flowserve Corp. (FLS) and Graham Corp. (GHM). All these carry a Zacks Rank #2 (Buy).
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