Generac Power Systems to launch $800 million term loan B on Thursday

By Sara Rosenberg

New York, May 8 - Generac Power Systems Inc. has set a conference call for 10 a.m. ET on Thursday to launch a proposed $800 million term loan B, according to a market source.

J.P. Morgan Securities LLC is the left lead bank on the deal.

Proceeds will be used to refinance about $574 million of existing term loan debt and to pay a special cash dividend of up to $10 per share on its outstanding common stock that is expected to be done before the end of this quarter.

Other funds for the transaction will come from $400 million in senior unsecured debt.

Company officials said in a conference call on Tuesday that it anticipates the overall cost of debt to total around 7%.

Officials went on to point out that leverage will be increasing to around 5 times because of the additional debt. Current net debt leverage is around 2 times.

In addition, the company expects to refinance an existing $150 million undrawn revolver with a similarly sized asset-backed revolver.

Also on Tuesday, the company released first-quarter results that showed net income of $30.1 million, or $0.44 per diluted share, compared to $4.8 million, or $0.07 per diluted share, in the first quarter of 2011.

Net sales for the quarter were $294.6 million, up from $124 million last year.

Adjusted EBITDA was $75.8 million, versus $27.5 million in the 2011 first quarter.

And, the company had free cash flow of $36.4 million, compared to $11.1 million in the previous year.

Generac is a Waukesha, Wis.-based designer and manufacturer of generators and other engine powered products.

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