Gorman-Rupp Refinances Debt, Cuts Interest Expense

By Tamara Parker • Tuesday, June 04 06:03 • Permanent Link

The Gorman-Rupp Company (NYSE: GRC) has recently completed a series of transactions to refinance its debt, which is expected to have significant positive impacts on its financials.

The company has upsized, amended, and extended its existing senior term loan facility to $370.0 million. Additionally, it has amended and extended the existing $100.0 million revolving credit facility and issued $30.0 million of new 6.40% senior secured notes due 2031. The company also retired the existing $90.0 million unsecured subordinated credit facility.

As a result of these transactions, the company is expected to reduce its annual interest expense by approximately $7.0 million, subject to changes in the underlying interest rates. This reduction in interest expense is a significant improvement and will positively impact the company's overall financial position.

The company will record a $1.8 million prepayment fee related to the early retirement of the unsecured subordinated credit facility and will expense approximately $1.3 million of transaction-related fees. Additionally, a non-cash charge of approximately $4.4 million will be recorded to write-off unamortized previously deferred transaction fees related to both the unsecured subordinated credit facility and a portion of the existing senior term loan facility.

Since the acquisition of Fill-Rite in May 2022, the company has been focused on reducing the debt incurred to finance the acquisition and improving its leverage. The company's efforts have paid off, as its financial results and working capital management have improved its leverage, allowing it to retire the higher interest unsecured subordinated debt and replacing it with lower interest secured debt with a later maturity date.

The company's executive vice president and chief financial officer, Jim Kerr, commented that the new debt structure provides flexibility and continues to position the company to execute on its strategic initiatives and create value for its shareholders.

Following these announcements, the company's shares moved 2.5%, and are now trading at a price of $35.4. For the full picture, make sure to review Gorman-Rupp's 8-K report.

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