Banks expand ATSG’s secured credit facility
02 / 06 / 2016
US freighter lessor Air Transport Services Group (ATSG) has obtained commitments for an expansion of the revolver portion of its secured credit facility with a consortium of banks led by SunTrust by $100m, to $425m.
ATSG, which in March signed a deal with internet retail giant Amazon to operate an air cargo network of 20 Boeing freighters, has also extended the maturity of the entire debt facility by 12 months.
Additionally, the facility includes an amortising term loan which currently has an outstanding balance of $97.5m. Both the revolver and term loan mature in May 2021.
Outstanding debt against the revolver was $240m at March 31, 2016. The credit facility is secured by certain designated aircraft.
Quint Turner, chief financial officer of ATSG, said: "We appreciate the continued strong support of our long-time bank group as we invest our capital to meet the growing customer demand for our mid-size freighter assets and support services, while at the same time continuing to repurchase our shares.
“The responses from our lender group indicated they are willing to provide even greater credit availability beyond our current request, should the need arise."
As part of the landmark Amazon commercial agreement, the e-tailer has already taken a 9.99% share in ATSG, acquiring just over 7m shares of common stock at an agreed price of $9.73 per share, making an investment of around $69m.
In total, Amazon will have the opportunity to purchase 19.99% of ATSG in three tranches.
ATSG said that other features of the secured credit facility amendment announced with the banks include: Permitted annual share repurchases were increased from $50m to $75m, subject to a leverage ratio based on EBITDA as defined under the credit agreement.
The leverage limitation is no greater than 2.75 times, up from 2.5 times under the prior agreement, on a trailing 12 months basis. ATSG’s Board of Directors increased its share repurchase authorisation to $100m on May 12, 2016.
The increase in the revolver ceiling includes a new $100m accordion feature, under which the limit on revolver credit could increase up to $525m with approval of the bank consortium.
The variable interest rate structure on the revolver remains unchanged. Rates are affected by LIBOR, plus an interest rate spread that adjusts based on the stated leverage ratio. The revolver interest rate is currently 2.2%.