Agreement offers company low-cost capital for growth
MANKATO, Minn. – August 11, 2011 – HickoryTech Corporation (NASDAQ:HTCO, news, filings) announced today the closing of its new debt financing agreement for an aggregate credit facility of $150 million. The new credit facility offers HickoryTech access to additional financing 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 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 confidence our lenders have in our business model and further strengthens HickoryTech’s long-term capital structure.”
Credit Agreement Details
The debt refinancing plan includes the issuance of $120 million in secured term loans and a $30 million secured revolving credit facility. 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 current leverage ratio, the applicable margin will be 3.00 percent for LIBOR loans and 2.00 percent for base rate loans, and there is no LIBOR floor amount.
Beginning Dec. 31, 2011 and on the last day of each quarter thereafter, the company is required to make quarterly amortization payments of $300,000 on the Term Loan B facility. All amounts outstanding on the revolving loan facility and Term Loan B facility will be due on Dec. 31, 2016.
This credit agreement includes new allowances for continued payment of HickoryTech dividends and common stock repurchases, and the absence of a specific capital expenditures limitation. The agreement also has been designed to provide for business acquisitions that fit the company’s growth plans.
As a result of the refinancing, HickoryTech will recognize cash charges comprised of certain fees, as well as direct and incremental third-party costs. HickoryTech expects to record approximately $2.0 to $2.2 million in capitalized or deferred charges related to the refinancing transaction in the third quarter ending Sept. 30, 2011, and an additional $400,000 in interest expense which primarily consists of early termination costs on the prior credit agreement.
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 and a debt service coverage ratio of greater than 2.5 to 1.0.
"With a leverage ratio of approximately 2.8 times EBITDA, our relatively low levels of debt provide us with significant flexibility as we execute our business plan,” said Christensen. "We are eager to continue our growth with a goal of generating sustainable free cash flow and creating long-term value for our shareholders."
HickoryTech is a regional communications leader implementing its enhanced growth plan, which was initiated in 2009 with its acquisition of a Minneapolis CLEC, and is focused on growing its business fiber and data services and broadband services. The growth plan includes aggressive expansion of the company’s regional fiber network, as demonstrated by its 2010 network expansion to Sioux Falls, South Dakota, Fargo, North Dakota, and Des Moines, Iowa. HickoryTech also started a three-year fiber expansion project to build high-capacity, middle-mile broadband communication facilities in northern Minnesota and last-mile expansions in southern Minnesota. This new project will be funded in part by a grant from the National Telecommunication and Information Administration's (NTIA) Broadband Technology Opportunities Program (BTOP) Program.
Lenders of the new credit facilities include: CoBank ACB as Administrative Agent, Sole Lead Arranger and Bookrunner; Union Bank, N.A. as Syndication Agent; Sun Trust Bank, N.A. as Documentation Agent, Raymond James Bank, FSB, Associated Bank, N.A. and four Farm Credit System Institutions.
The form 8-K with the final credit agreement will be filed with the Securities and Exchange Commission and will be available at http://investor.hickorytech.com under "SEC Filings."
HickoryTech Corporation is a leading communications provider serving business and residential customers in the upper Midwest. With headquarters in Mankato, Minn., the corporation has 460 employees and an expanded, multi-state fiber network spanning more than 2,750 route miles serving Minnesota, Iowa, North Dakota and South Dakota. Enventis 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. HickoryTech delivers 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.hickorytech.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.