ALJ Announces Modifications to KES Senior and Subordinated Debt Terms
07/23/2009 - ALJ Regional Holdings operating subsidiary KES Acquisition amends terms of its senior credit facility and the junior indebtedness evidenced by its 8% subordinated secured notes.
ALJ Regional Holdings, Inc. operating subsidiary KES Acquisition Co. has amended terms of its senior credit facility and the junior indebtedness evidenced by its 8% subordinated secured notes.
KES entered into the Third Amendment to the Financing Agreement and First Amendment to Security Agreement on July 20by and among KES and its lenders, Ableco Finance and PNC Bank, National Association.
As a result of the amendment, the final maturity date for the Senior Debt was extended for one year to February 22, 2011, and as a result the quarterly principal payments under the term loan were reduced from $750,000 to $500,000.
Certain financial covenants and metrics, including the EBITDAM covenant were reduced as a result f the amendment, while the borrowing base multiplier was increased. The amendment also increased the Senior Debt interest rate by one percentage point.
Subject to certain limitations, the amendment also makes it possible for KES to create two acquisition subsidiaries that will not be encumbered pursuant to the terms of the Senior Debt.
“We are happy that we were able to work with our lenders to modify our debt in a manner that benefits everyone,” said John Scheel, CEO of KES and ALJ, discussing the transaction. “The extended maturity date and new financial covenants provide us with additional flexibility as we are starting to see a slight improvement in demand. Further, our new ability to create subsidiaries outside of the Senior Debt will better position us to explore strategic opportunities.”
KES also made modifications to the terms of its Junior Debt. The lenders with respect to KES’ Junior Debt include, among others: Ableco, ALJ and Jess Ravich, Hal Byer and Scott Fritz, all of whom serve on ALJ’s board.
ALJ is the parent company of KES Acquisition Co., which does business as Kentucky Electric Steel, the owner and operator of a steel minimill near Ashland, Ky., producing both merchant bar quality flats (MBQ Bar Flats), and special bar quality steel flats (SBQ Bar Flats).
