Dan River continues refinancing

Don Hogsett, April 21, 2003

Buying itself some breathing space in an increasingly harsh environment for U.S. textiles producers, Dan River Inc. has completed a two-phase refinancing of its debt that puts the diversified textiles producer on a firmer financial footing.

Last month, the company cut a deal for $200 million in new bank financing, and last week it cemented the deal selling $157 million in new bonds that will allow it to retire a bond issue that was coming due later this year, pushing the maturity out six years to 2009.

But the extra elbow room didn't come cheap, and the company is now paying 12.75 percent interest on the new bond issue, about 25 percent more than the 10.125 percent interest rate paid on the bond issue now being retired.

In the earlier, bank-debt phase of the refinancing, Dan River closed the deal on a five-year, $160 million revolving credit facility and a five-year, $40 million term loan.

Putting together the proceeds from the new bank financing and the bond issue, Dan River planned to pay down roughly $239 million in debt, all coming due by the end of this year — about $119 million in bank debt due Sept. 30 and another $120 million in bonds the company had to come up with by Dec. 15.

The refinancing was earlier cheered by two of the nation's biggest debt rating agencies, Standard & Poor's and Moody's, which said they're likely to upgrade the company's credit rating as a result.

S&P said it will raise the company's corporate credit rating to "B-plus" from "B-minus" once the deal is done. S&P said the upgrade reflects its expectation "that the refinancing will allow Dan River to sustain its improved 2002 financial performance."

Moody's said it's prepared to upgrade Dan River bank debt to a "B2" rating and its unsecured debt to a "B3" rating, citing the company's "strong market positions in home fashion and apparel fabrics markets and significant improvements in operations as evidenced by better working capital management and increased asset utilization in 2002."

The agency said the refinancing "will significantly improve Dan River's near-term liquidity by eliminating all current maturities of long-term debt and will better position the company for future growth."

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