Ritchie Bros. intends to pay down debt levels following the close of the IronPlanet acquisition with expected cash flows.
Ritchie Bros. Auctioneers has announced the closing of a new five-year credit agreement totaling US$1.0 billion with a syndicate of lenders comprising:
(1) Multicurrency revolving facilities of up to US$675 Million (the "Revolving Facilities"), and,
(2) A delayed-draw term loan facility of up to US$325 Million to finance the previously announced acquisition of IronPlanet.
The Facilities will remain unsecured until the closing the of the IronPlanet acquisition, after which the Facilities will be secured by assets of Ritchie Bros. and certain of its subsidiaries in Canada and the United States. The Facilities are expected to become unsecured again after the IronPlanet acquisition, once Ritchie Bros. meets specified credit ratings or leverage ratio conditions. Ritchie Bros. intends to pay down debt levels following the close of the IronPlanet acquisition with expected cash flows, which should facilitate the release of the security on the debt. The Company consistently generates free cash flows in excess of net income as it processes cash flows relative to its auction proceeds, not simply its revenues.
"We were very pleased with the interest banks expressed in participating in our new debt syndicate, evidenced by its significant over-subscription. I would like to thank all banks involved for their continued support," stated Sharon Driscoll, Chief Financial Officer. "Our new debt arrangements provide us with increased financial flexibility relative to our prior debt arrangements, and will help us achieve future growth initiatives including our previously announced acquisition of IronPlanet. Ritchie Bros.' strong and unique cash flow profile will drive a fairly rapid de-levering of our balance sheet following the acquisition of IronPlanet, which will return our debt ratios to more conservative levels within a relatively short period of time."
In conjunction with the announcement, Ritchie Bros. has terminated approximately US$600 million of its pre-existing revolving bi-lateral credit facilities and private notes to provide the Company with more suitable covenants and financial flexibility. Approximately US$6.8 million of charges in relation to the early termination of the private notes are expected to be booked in the Company's fourth quarter.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBC Capital Markets served as Joint Lead Arrangers and Joint Bookrunners. Bank of America, N.A. served as Administrative Agent and the Royal Bank of Canada as Syndication Agent.