Georgia Gulf Corp. (GGC:US), North America’s largest maker of vinyl construction products, amended its senior secured credit facility to avoid breaking financial terms of the agreement later this year. The company’s shares surged.
Lenders increased the interest rate on the facility to 1 percentage point to 6.5 percentage points more than the London interbank offered rate in exchange for relaxed covenants, the Atlanta-based company said today in a filing with the U.S. Securities and Exchange Commission.
Georgia Gulf, which acquired Canadian building-products maker Royal Group Technologies Inc. in 2006 as the U.S. housing market began to deteriorate, previously amended the facility in September after cutting its dividend (GGC:US). The company said it was forced to amend the agreement again because it anticipated violating covenants when they tightened on June 30.
The amendment increases the maximum ratio of debt (GGC:US) to earnings before interest, tax, depreciation and amortization, or Ebitda, to at least 8.25 for the four quarters of 2009. The measure had been set to tighten to 3.75 from 8 this year.
Lenders also lowered the minimum ratio of Ebitda to interest expense (GGC:US), which had been set to rise to 3 from 1.45 this year, to 1.3 at most throughout 2009. The two ratios will return to their originally scheduled levels in the first quarter of 2010.
Georgia Gulf rose 92 cents to $1.30 at 4:15 p.m. in New York Stock Exchange composite trading (GGC:US). The stock has lost 76 percent in the past year.
Georgia Gulf must maintain Ebitda of at least $140 million and is limited to $35 million in capital spending this year, according to the filing.
The credit facility features an $800 million term loan and a $375 million revolving credit line, under which the company had $143 million available as of Dec. 31. The amendment requires Georgia Gulf to maintain at least $75 million of availability under the revolving line, according to the filing.
The company also renewed its asset securitization agreement, raising the size of the facility to $175 million, according to the filing. The agreement now includes U.S. and Canadian receivables and may be increased to $200 million.
The manufacturer was in compliance with all its covenants as of Dec. 31, according to its annual filing. Georgia Gulf said it expects to pay off $56.8 million of borrowings over the next 12 months, including $36.3 million from the revolving credit line and $3.5 million of the term loan’s principal.
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