West improves capital structure with debt repayment, loan amendments

By Jennifer Lanning Drey

Savannah, Ga., Oct. 21 - West Corp. has a significantly improved capital structure and debt maturity profile after applying the proceeds from its recent notes offering to its term debt and amending and extending its credit facility agreement, Paul Mendik, chief financial officer of West, said Thursday during the company's third-quarter earnings conference call.

West received the proceeds from its recent $500 million senior unsecured notes offering on Oct. 5 and used them to pay off $500 million of its senior secured term loan facility maturing in 2013, Mendik said.

As previously reported, West also recently made modifications to its senior secured credit facilities, including extending the maturity of $201 million of its revolving line of credit to January 2016 from October 2012. The company also extended the maturity of $500 million of its existing term loans to July 2016 from October 2013.

After giving effect to the amendment and new issuance, the company has $250 million in revolving credit line commitments, $49 million of which expire in 2012 and $201 million of which were extended to 2016.

The company also has a $450 million term loan due 2013 and a $1.485 billion term loan due 2016.

On the bond side, West has $650 million in senior notes due 2014, $450 million in senior subordinated notes due 2016 and $500 million in senior notes due 2018.

Future repayment plans

During the question-and-answer session of the call, West's chief executive officer Thomas Barker was asked to address the company's plans for the remaining portion of the 2013 term loan that was not repaid with the bond proceeds in October.

"We think we've got some time, and we think the business throws off nice cash. We're sitting in a good cash position now, our revolver has not been drawn down on, we have a potential equity offering," he said.

"As the business continues to grow and perform well and as we delever, we expect our ratings to improve and we'll take a look at that when we think it's in our best interest to reduce that."

$137.9 million of cash

At the Sept. 30 close of the third quarter, West had $137.9 million of cash and cash equivalents. Its revolving lines of credit were all undrawn at quarter-end, Mendik said.

Regarding its approach to cash, the CFO said West would keep its cash available for acquisitions.

"We could, I suppose, prepay some of our installments on term debt but we're not likely to do that in the near term, so we'll probably let that cash build up, at least for the time being," he said.

The company generated cash flows from operations of $107 million for the third quarter, compared to cash flows from operations of $99.8 million for the same period in 2009.

Leverage ratio in compliance

At quarter-end, West's leverage ratio for its senior secured term loan was 5.19 times, compared with a covenant requirement of 5.7 times, the CFO also reported during the call.

Interest coverage was 2.87 times compared with a requirement of 2.0 times, he said.

West reported third-quarter revenue of $592.4 million, compared with $559.0 million of revenues in the same quarter in 2009. The company said the net increase in revenue from entities acquired or sold was $6.8 million during the third quarter.

Adjusted EBITDA for the third quarter was $160.9 million, compared to adjusted EBITDA of $153.2 million for the third quarter of 2009.

West is an Omaha-based provider of outsourced communication services.

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