ClubCorp to cut leverage ratios to below 4x, pay down debt with cash

By Devika Patel

Knoxville, Tenn., Oct. 13 – ClubCorp Holdings, Inc. will delever its balance sheet in an effort to cut its leverage ratio to below four times earnings. As part of this strategy, the company plans to use its excess cash to pay down its debt and ClubCorp’s chief executive pointed to the company’s recent loan refinancing as part of these cost-saving measures.

“We will continue our successful acquisition and reinvention strategy and now feel the company is better positioned to actively delever our balance sheet,” president and chief executive officer Eric Affeldt said on the company’s earnings call on Thursday.

“The company’s current leverage ratio stands at 4.4x and we are now reducing the company’s target leverage ratio to below 4x and expect to achieve this lower leverage ratio over the next 12 to 18 months.

“We plan to further delever by growing adjusted EBITDA, reducing total capital spend and using excess cash to pay down debt.

“This quarter we repriced and refinanced our debt to lower future interest expense, increasing free cash flow by approximately $2.5 million annually.

“The company completed the repricing of its existing term loan facility and was able to lower the rate on its loan to Libor plus 300 basis points with a 1% Libor floor.”

Loan

As previously reported, on Sept. 14, ClubCorp Club Operations Inc. launched a repricing of its $675 million senior secured covenant-light term loan due Dec. 15, 2022 at Libor plus 300 basis points with a 1% Libor floor and a par issue price. The repriced loan has 101 soft call protection for six months and took the term loan down from Libor plus 325 bps with a 1% Libor floor.

Citigroup Global Markets Inc. is the lead bank on the loan.

Financial highlights

At the end of the third quarter, the company had $92.1 million in cash and cash equivalents and total liquidity of $237 million.

Additionally, ClubCorp completed the refinancing of $37 million in mortgage debt with a new rate of Libor plus 290 basis points, with a 0.25% Libor floor. Combined with the refinancing of the $675 million loan, the transactions will save the company $2.5 million in annual cash interest expense.

The Dallas-based company manages and operates golf and country clubs, as well as business, sports and alumni clubs in the United States.

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