ATSG gets commitment for $325 million facility at Libor plus 200 bps

By Susanna Moon

Chicago, May 2 - Air Transport Services Group, Inc. said it obtained a commitment for a new $325 million secured credit facility with a consortium of banks led by SunTrust.

The facility includes a term loan of $150 million and a $175 million revolver with an accordion for up to an additional $50 million.

The five-year credit facility will replace the current facility, also led by SunTrust, which is scheduled to expire at the end of 2012.

Interest will be Libor plus 200 basis points, which is 25 bps lower than the comparable rate under the current agreement, according to a company press release.

The company said it plans to execute fixed-price interest rate hedges on at least half of the $150 million term loan by the end of June.

Amortization of upfront fees associated with the new facility will be $1.2 million lower on an annual basis than under the current agreement, the release noted.

The facility will be secured by some designated aircraft to provide 150% collateral coverage of the outstanding debt.

Joint lead bank responsibilities in the consortium will be shared by Regions Bank and JPMorgan Chase & Co. Documentation agent responsibilities will be assumed by Bank of America.

ATSG said it expects that terminating the current facility before its expiration will result in a first-quarter 2011 non-cash charge to pre-tax earnings of $6.8 million. The majority of this non-cash charge relates to ATSG ceasing its hedge accounting for an interest-rate hedge required under the prior agreement, as well as the write-off of other costs related to the prior agreement.

"Our strong financial position, valuable asset base and significant cash flow, coupled with favorable credit market conditions, enabled us to extend our access to long-term capital at very attractive terms," Quint Turner, chief financial officer of ATSG, said in the release.

"The new facility will enhance our flexibility to invest for growth, while continuing to meet or exceed our return on capital targets. Interest from lending institutions in participating in the new facility was high, resulting in a significant oversubscription of offered commitments."

ATSG is a Wilmington, Ohio-based company that provides aircraft, airline operations and other related services to the shipping and transportation industries through its subsidiaries.

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