Kirby to use bank line, additional debt financing to fund acquisition

By Devika Patel

Knoxville, Tenn., Feb. 5 – Kirby Corp. plans to take on additional borrowings and also use its $380 million bank line to finance its planned acquisition of Higman Marine, Inc.

“Last night we announced the signing of a definitive agreement to purchase substantially all of the assets and businesses of Higman Marine for approximately $419 million in cash, which we intend to finance through additional borrowings,” president, chief executive officer and interim chief financial officer David W. Grzebinski said on the company’s conference call announcing the deal on Monday.

“We intend to finance this acquisition through additional debt,” executive vice president of finance Bill Harvey said on the call.

The company has liquidity of about $380 million from its bank line, with “very minimal” cash, so it is exploring financing alternatives for the additional $39 million of debt.

“[As of last week,] our unused bank line was $380 million.

“We had very minimal cash.

“We’re looking at all alternatives [to finance the remaining $39 million],” Harvey said.

The company expects its debt levels to rise, but will prioritize deleveraging in order to keep its investment-grade ratings.

“The additional borrowings will have a modest impact on our debt to capital ratio taking it from about 24% to 28%,” Harvey said.

“However, Kirby remains committed to maintaining our investment-grade ratings and retaining a conservative capital structure through this cycle.

“As such, we intend to prioritize deleveraging with our free cash flow,” Harvey said.

“We’ll generate good free cash flow, so we’ll use that to de-lever some and get the balance sheet in shape for the future,” Grzebinski said.

There is no inherited debt with this deal.

“It’s a cash-free, debt-free transaction,” Harvey said.

“We don’t inherit any debt,” Harvey said.

The deal is expected to close during the first quarter.

Kirby is a Houston-based operator of inland tank barges and towing vessels to transport petrochemical products.

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