Orbital Cuts Interest Costs With New Financing
Dulles, Va.-based Orbital Sciences [NYSE: ORB] is expected to save more than $10 million in annual interest costs through a $135 million debt financing that it closed last week.
Orbital reduced its debt expense – including amortization savings and deferred financing costs – by roughly 40 percent through the deal, company officials said. The company also established a $50 million credit facility last week, arranged by Bank of America, to replace a $35 million revolving line of credit with Wells Fargo/Foothill Capital that had been in effect since March 2002.
“The company is in a significantly strengthened financial position versus a year ago,” said Michael Williams, treasurer and senior vice president at Orbital.
“We believe that the placement of lower-cost and longer-term debt and the establishment of a new credit facility provides Orbital with a solid financial foundation with greater financial flexibility to support future growth, profitability and free cash flow,” said Garrett E. Pierce, Orbital’s vice chairman and chief financial officer.
Orbital closed a much higher cost debt financing arrangement last year, but opted to go back into the market to find a lower-cost deal in light of the company’s improved financial performance and a general decline in interest rates.
“The fact that long-term rates are at historic lows is a positive factor,” said Williams. The flow of funds “into the high-yield debt market has been positive for several months. Our consistent and solid performance during the past year helped us take advantage of these attractive market conditions.” The company’s improved performance and cash flow also afforded it the opportunity to arrange for a new credit facility on better terms than the previous deal, Williams said. Bank of America served as the sole book running manager of the debt refinancing, in addition to its role as the lead arranger for Orbital’s line of credit.
The move to extinguish debt is expected to cause Orbital to record a third quarter charge of approximately $39 million, including $32 million of non-cash charges to write off unamortized debt discount and deferred financing costs.
Williams, who arrived in December 2001, is a former corporate and investment-banking executive at Bank of America. His mission with Orbital is to support the company’s capital raising activities.
The debt financing that Orbital closed last week was made possible by the plan’s approval by its note holders in return for payment of 105 percent of their principal. The related tender offering positioned Orbital to complete the debt refinancing.
(Barron Beneski, Orbital Science, 703/406-5000)