Small appliance maker Applica Incorporated announced that it has entered into a secured term loan agreement with Mast Credit Opportunities I, Ltd. to borrow U.S. $20 million.
The term loan is subordinate to Applica's senior revolving credit facility and matures in November 2009. Applica will use the proceeds from the term loan to repurchase from Mast $5 million of its 10 percent senior subordinated notes due 2008 at 98 percent of par value. The balance of the proceeds will be used to pay down its senior revolving credit facility. Mast currently owns approximately 5.8 percent of the outstanding common stock of Applica.
"The funds we received from Mast will provide Applica with further flexibility to more effectively address strategic initiatives as we enter 2006," stated Harry D. Schulman, Applica's president and CEO. "We have maintained a sufficient level of borrowing availability under our senior revolving credit facility to fund our seasonal peak in working capital and we have never experienced any interruption in the supply of products to our customers as a result of liquidity issues. In fact, throughout 2005 we have maintained an average monthly availability of at least $30 million. Today, including the loan from Mast, we have approximately $44 million in availability," added Schulman.
Currently, Applica must maintain an average monthly availability of $20 million under its senior credit facility and has a daily availability block of $15 million.
In connection with the new term loan, Applica provided Mast with limited financial projections for 2006. The company expects sales for the year ended Dec. 31, 2006 will total approximately $580 million and gross margins will be approximately 30.5 percent. Depreciation and amortization for 2006 is expected to be approximately $12 million, interest expense is expected to be approximately $11.5 million and the average debt outstanding is expected to be approximately $135 million. Applica expects net earnings of approximately $7.7 million for the year ended Dec. 31, 2006.
As previously announced, due to the unpredictable nature of restructuring and other charges that may be incurred as a result of its strategic initiatives, Applica has not updated its outlook for earnings guidance for 2005. The guidance for 2006 is limited to the summary outlined above and Applica does not intend to update this guidance at any time. The company is expected to conclude near the end of 2005, Applica will re-evaluate the policy next year.
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