Service Corp. refi strengthens balance sheet; EBITDA reduces leverage

By Devika Patel

Knoxville, Tenn., Oct. 29 – Service Corp. International pushed out its debt maturity profile through a recent refinancing, and the company now has nearly $750 million of liquidity with a lower leverage ratio, largely due to higher EBITDA during the quarter.

“We have improved our fortress balance sheet position with our most recent refinancing, further lowering interest cost as well as extending and improving our debt maturity profile,” chairman, president and chief executive officer Thomas L. Ryan said on the company’s third quarter ended Sept. 30 earnings conference call on Thursday.

“We are fortunate to have a resilient business model with reliable cash flows that are allowing us to weather the uncertainty created by Covid-19,” senior vice president and chief financial officer Eric D. Tanzberger said on the call.

“While we entered the pandemic bolstered by a strong financial position and a favorable debt maturity profile, we continue to be well positioned with a significant amount of liquidity,” Tanzberger said.

The company has $740 million of liquidity, consisting of $220 million of cash on hand plus $520 million available on its long-term bank credit facility.

Leverage fell last quarter.

“On the much higher EBITDA reported this quarter, we were able to reduce our leverage from 3.79x at June 30 to 3.44x at Sept. 30,” Tanzberger said.

Cash and cash equivalents were $220,304,000 as of Sept. 30, 2020, compared to $186,276,000 as of Dec. 31, 2019.

Long-term debt was $3,584,506,000 as of Sept. 30, 2020, compared to $3,513,530,000 as of Dec. 31, 2019.

On Aug. 3, Service Corp. priced an $850 million issue of 10-year senior notes (Ba3/BB) at par to yield 3 3/8% in a drive-by.

The yield printed 12.5 basis points through the 3½% to 3¾% yield talk. Initial talk had the deal coming to yield in the 4% area.

BofA Securities Inc., J.P. Morgan Securities LLC, Truist Securities Inc. and Wells Fargo Securities LLC were the joint bookrunners.

The Houston-based death care services provider earmarked the proceeds to fund a tender offer for $850 million of its 5 3/8% senior notes due 2024, with the remainder to be used for general corporate purposes, which may include repayment, redemption or repurchase of debt.

On Aug. 10, the company reported that it planned to redeem all of its outstanding 5 3/8% senior notes due 2024 (Cusip: 817565CB8) not purchased under the tender offer.

The notes were redeemed at 101.792 plus accrued interest, if any, to Sept. 9, the redemption date.

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