Service Corp. International closes on $185 million revolver

By Sara Rosenberg

New York, July 25 - Service Corp. International closed on a new $185 million secured revolving credit facility due July 2005. The loan includes facilities available to issue letters of credit, which will help the company release approximately $60 to $70 million in cash currently deposited with third parties.

J.P. Morgan Securities Inc. and Banc of America Securities LLC were joint lead arrangers and joint bookrunners. JPMorgan Chase Bank was administrative agent, Bank of America was syndication agent and Credit Lyonnais, Lehman Commercial Paper Inc. and Merrill Lynch Capital Corp. were co-documentation agents.

Interest rates are based on the company's leverage ratio. If the leverage ratio is greater than or equal to 4.0 to 1.0 the interest rate is Libor plus 250 basis points. If the leverage ratio is less than 4.0 to 1.0 and greater than 3.25 to 1.0 the interest rate is Libor plus 225 basis points. And, if the leverage ratio is less than 3.25 to 1.0 the interest rate is Libor plus 200 basis points, according to a filing with the Securities and Exchange Commission.

If usage is less than 33%, the commitment fee is 75 basis points. If usage is greater than 33% but less than 66%, the commitment fee is 62.5 basis points. And, if usage is greater than or equal to 66%, the commitment fee is 50 basis points, according to the SEC filing.

Negative covenants include interest expense coverage ratio requirements and leverage ratio requirements (see Table 1). Furthermore, maximum capital expenditures allowed at Dec. 31, 2002 is $140 million and at Dec. 31, 2003 and thereafter is $130 million, according to the filing.

"We are pleased with the completion of this new credit facility and the support from the financial institutions indicating their confidence in our continued improvement of our capital structure," said Robert L. Waltrip, chairman and chief executive officer, in a company press release. "With our cash and cash equivalents on hand and the completion of this new credit facility, our Company now has approximately $245 million of liquidity to meet future operating needs and debt maturities. With less than $150 million of debt maturing in the remainder of 2002 and in 2003, the Company expects its liquidity to remain strong as it also expects to generate significant operating free cash flow and proceeds from asset sales and joint ventures in this period of time."

The Houston, Tex. provider of funeral and cemetery services expects net debt to be in the range of $1.8 to $1.9 billion at Dec. 31 and proceeds from assets sales to between $300 and $400 million in 2002.

Table 1:

Fiscal Quarter Ending Minimum Interest Expense Coverage Ratio Maximum Leverage Ratio

September 30, 2002 2.25 to 1.00 5.25 to 1.00

December 31, 2002 2.25 to 1.00 5.25 to 1.00

March 31, 2003 2.25 to 1.00 5.00 to 1.00

June 30, 2003 2.50 to 1.00 5.00 to 1.00

September 30, 2003 2.50 to 1.00 5.00 to 1.00

December 31, 2003 2.50 to 1.00 4.75 to 1.00

March 31, 2004 3.00 to 1.00 4.50 to 1.00

June 30, 2004 3.00 to 1.00 4.50 to 1.00

September 30, 2004 3.00 to 1.00 4.25 to 1.00

December 31, 2004 3.25 to 1.00 4.00 to 1.00

March 31, 2005 3.25 to 1.00 3.50 to 1.00

June 30, 2005 3.25 to 1.00 3.50 to 1.00

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