Service Corp. hoping to replace maturing revolver with new one by June

By Sara Rosenberg

New York, April 8 - Service Corporation International, a provider of funeral and cemetery services, is presently talking with potential lenders about a new revolving credit facility to replace its current revolver which matures in June, a filing with the Securities and Exchange Commission said. The target size of the new revolver falls somewhere around $200 million to $300 million and the loan would most likely be secured by company assets, the filing added.

According to a company source, the interest rate on the proposed new revolver would be higher than the current interest rate due to the downgrade of the company's credit ratings since the initial loan was obtained. The interest rate on the $400 million five-year revolver is Libor plus 150 basis points, the source said. Moody's Investors Service currently rates the company's outstanding debt Ba3. Standard and Poor's rates the outstanding debt BB-.

Service Corp., however, is looking to raise its credit ratings and hopes for an upgrade by year-end, the company source said.

"We hope by achieving our financial goals, that would afford us an upgrade, but that's not guaranteed," the source explained.

The SEC filing addressed the upgrade expectation by stating: "The Company's objectives in 2002 remain consistent with those established in prior years and focus on continued stabilization of the Company's capital structure through continued cash flow improvement, asset divestitures and debt reduction. The Company believes its goal of stabilizing its capital structure will be achieved by having a debt to recurring operating free cash flow ratio of 10:1 or less. Management believes this ratio is consistent with a stable 'BB' credit rating from Standard & Poor's and 'Ba2' from Moody's with general access to the capital markets."

The company has a $29.061 million two-year term loan, which also matures in June, however, according to the source, "it is not likely that the company will get a new term loan."

Currently, there is nothing outstanding under any of the credit facilities, the source added.

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