Crown Crafts completes refinancing of corporate credit facility

12 Jul '06

4 min read

The CIT facility allows the Company to borrow up to $22 million on a three-year revolving line of credit secured by accounts receivable, inventory and fixed assets at a favorable interest rate of 1 percent below prime. The $16 million debt which was retired with this new loan had an effective rate of 11.65 percent.

In connection with the refinancing, non-interest bearing subordinated indebtedness was reduced from $8 million to $4 million, payable in two non-interest bearing installments of $2 million each in July 2010 and July 2011. The $8 million debt was carried on the Company's books net of an unamortized discount of $1 million immediately before the refinancing.

The new $4 million debt will initially be recorded net of an original issue discount of $1.1 million. The Company expects to record an approximate pre-tax gain of $4.0 million on the subordinated debt reduction. After the refinancing, current debt under the new agreement will be approximately $12.6 million compared to $23.9 million at the end of fiscal 2006.

Chestnut continued, "Following last month's announcement of a 57 percent increase in pre-tax net income, this event further transforms our Company and is a clear confirmation by the lending community of our renewed financial strength. Since 2001, we have stabilized our business, have adjusted to significant changes in production, sourcing, importing and direct-to-retail supplying and have actually improved profitabilityboth as a percentage of revenues and in absolute terms.

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