McGrath RentCorp closes $420 million revolver due 2017 via Merrill

By Susanna Moon

Chicago, June 18 - McGrath RentCorp closed on a $420 million unsecured revolving credit facility due June 15, 2017 with an option to boost the size to $450 million with $30 million of additional commitments.

Interest on the loans is initially Libor plus 150 basis points, based on leverage. The margin is 100 bps to 175 bps. The used fee is 25 bps, with a spread of 15 bps to 30 bps.

The agreement includes a $25 million sublimit for the issuance of standby letters of credit and a $10 million sublimit for swingline loans.

The company amended its credit agreement with Bank of America, NA as administrative agent on Friday, according to an 8-K filing with the Securities and Exchange Commission.

Bank of America Merrill Lynch is the lead arranger and bookrunner. Union Bank, NA is syndication agent and lender; Wells Fargo Bank, NA is co-documentation agent and lender; and U.S. Bank NA is co-documentation agent and lender.

Proceeds will be used for working capital, capital expenditures, capital stock repurchases and permitted acquisitions, which include non-hostile acquisitions for a purchase price of up to 1.25 times the company's pre-acquisition consolidated EBITDA for the prior fiscal year.

The amended facility permits the company's existing debt to remain, which includes the company's $10 million Treasury sweep note due June 15, 2017, the principal amount of which may be refinanced, refunded, renewed, extended and increased to $15 million, and the company's $100 million outstanding notes issued April 21, 2011 under the $100 million 4.03% note purchase and private shelf agreement with Prudential Investment Management, Inc. due April 21, 2018.

In addition, the company may incur additional senior note debt of up to $250 million.

The facility replaces the company's $350 million credit facility dated May 14, 2008 with Bank of America as agent.

The covenants require the company keep consolidated fixed charge coverage ratio at the end of any fiscal quarter of at least 2.5 times, consolidated leverage ratio during any period of four consecutive fiscal quarters of no more than 2.75 times and the tangible net worth at the end of any fiscal quarter to be at least the sum of (i) $246,103,400 plus (ii) 25% of the company's consolidated net income, if positive, for each fiscal quarter after Dec. 31, 2011 plus (iii) 90% of the net cash proceeds from the issuance of the company's capital stock after Dec. 31, 2011.

In connection with the facility, the company's U.S. subsidiaries, Mobile Modular Management Corp., Enviroplex, Inc. and Adler Tank Rentals, LLC entered into a guaranty in favor of Bank of America as administrative agent.

Credit line

The company also entered into a credit facility letter agreement on Friday with Union Bank, NA, extending its $10 million line of credit facility related to its cash management services. The sweep service facility matures on the earlier of June 15, 2017, or the date that the company ceases to use Union Bank for its cash management services.

McGrath RentCorp is a diversified business-to-business rental company based in Livermore, Calif.

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