28.05.2009

Terex seeks new funds

Terex Corporation, owner of Terex Cranes and Genie AWP has announced that it is seeking around $600 million in new financing and that it has agreed an amendment to its current facility.

The company intends to offer $300 million in senior notes, $150 million in senior subordinated convertible notes and 11 million shares in exchanging for the new funding.

It will use the proceeds from the offering to pay down certain outstanding amounts under its current senior credit facility and for general corporate purposes.

Terex will also grant its underwriters an option to purchase and extra $22.5 million in convertible notes and 1,650,000 shares to cover any over-allotments.

Terex has also reached agreement on an amendment to its current credit facility, although it is conditional on the successful completion of the above offering.

The agreement eliminates covenants dealing with the company’s consolidated leverage ratio and fixed charge coverage ratio, instead requires the company to maintain liquidity of not less than $250 million on the last day of each fiscal quarter through June 30th 2011.

The amendment will increase the company’s interest cost and limit its ability to repurchase stock, pay dividends or redeem debt, and requires the Company to provide certain collateral to secure its obligations under the credit facility.

Vertikal Comment

With severe challenges in several of its operating businesses and the requirement to push ahead with its acquisition of Fantuzzi, Terex has become increasingly concerned over its funding and will struggle later in the year to meet several covenants and maintain liquidity, with little chance of selling off its weaker operations, such as the construction division which Ron DeFeo has said he will 'fix or ditch'.

It has therefore decided to launch this offer now in order to secure its ongoing funding, before the situaiton becomes too critical. There is a cost of course, in terms of higher interest costs and fees while diluting shareholders equity.

This latest amendment to its credit facility follows an agreement made in February to change the fixed charge coverage ratio. Click here to read that report