Kemet cuts debt to $330 million after note refi, aims to cut leverage

By Devika Patel

Knoxville, Tenn., Oct. 6 – Kemet Corp. plans to improve its leverage statistics as the company’s cash “continues to grow.”

The company recently used additional cash from an acquisition to lower its long-term debt to $330 million from $387 million and also refinanced its 10˝% senior note due 2018 using a Libor plus 600 bps term loan due 2024.

“We refinanced the debt that we had,” executive vice president and chief financial officer William Lowe said at the MicroCap Conference New York 2017 in New York on Thursday.

“We had a 10˝% senior note that was took out in May of 2010.

“It was expiring in 2018 and rather than have it go short term, we refinanced that note into a term loan, Libor plus 600 basis points, saves about $13 million of interest expense per year.

“It does amortize on principal at a flat rate of 5% and matures in 2024.

“We think we can do better on that rate down the road on a repricing because we refinanced at the time before we even recorded our first quarter results, combined with Tokin,” Lowe said.

On April 19, the company said it had completed its acquisition of NEC Tokin Corp.

The company ended the quarter with cash and cash equivalents of approximately $225 million.

“Cash continues to grow,” Lowe said.

“We expect it to continue to grow this fiscal year,” he said.

Long-term debt as of Friday was $330 million, Lowe said.

“As a part of the [Tokin acquisition], since we had the additional cash, we did decrease our long-term debt from $387 [million] to $330 million.

“Our goal is to continue to improve our leverage statistics to obtain better credit ratings and better interest rates going forward which will again create less interest expense and more EPS,” Lowe said.

As previously reported, on May 1, Kemet said it issued a call for its 10˝% senior notes due 2018 using proceeds of a new $345 million term loan credit facility.

The new seven-year term loan results in lower annual cash interest expenses, with interest expense savings of about $13 million annually.

Interest on the term loan is Libor plus 600 basis points.

“This refinancing gives us significant annual cash interest expense savings, and also provides us with the financial and operating flexibility to achieve our long-term growth objectives,” Per Loof, the company’s chief executive officer, said in a press release at the time.

Kemet is a Simpsonville, S.C., manufacturer of electronic capacitors.

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