Otelco gets $92 million five-year facility to refinance term loans

By Marisa Wong

Morgantown, W.Va., Nov. 6 – Otelco Inc. announced it refinanced its credit facilities with a new $92 million five-year credit facility from a consortium of banks led by CoBank, ACB.

Otelco entered into the credit agreement on Nov. 2. The new facility includes an $87 million term loan, which was fully drawn at closing, and a $5 million revolving loan, which is undrawn.

Proceeds from the new term loan and cash on hand were used to repay Otelco’s previous term loans.

The new facility reduces the effective interest rate on the company’s debt by more than 400 basis points and supports Otelco’s continued focus on reducing leverage. The lower interest rate is expected to reduce cash interest expense in 2018 by more than $3.5 million compared with the former facilities, according to a company press release.

Loans generally bear interest at Libor plus 400 bps to 475 bps, depending on the company’s total leverage ratio. The applicable margin is initially 450 bps, according to an 8-K filing with the Securities and Exchange Commission.

The revolver is subject to a commitment fee of 25 bps to 62.5 bps, also based on the total leverage ratio. The commitment fee is initially 50 bps.

The new facility includes a $20 million accordion feature available over the life of the facility.

The revolver includes a $1 million subfacility for swingline loans and a $1 million subfacility for letters of credits.

In addition, the credit agreement requires the company to maintain a minimum ratio of consolidated EBITDA to fixed charges and a minimum total leverage ratio.

The company said in the press release that the new facility allows it to pay dividends to its shareholders and redeem stock beginning in 2018.

Oneonta, Ala.-based Otelco provides wireline telecommunications services.

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