Tuesday, December 22, 2009

Notable financing. Saia raises cash....for its lenders (SAIA)

Trucking concern Saia Inc (SAIA) sold 2.3million shares in a private placement at $11.50 each, a huge discount to yesterday's closing price of 14.55.  Millions of shares have traded hands this fall in the $14-18dollar range, so this deal HAS to be upsetting those who bought higher.

But despite selling shares at $11.50, the stock is currently trading around 13.30, down only 8.6% on the day.  The reason is largely because the transaction got Saia's lenders off its back.  Saia used all the proceeds from the stock offering to (as required) prepay interest and principal.  While it would seem this transaction doesn't do much for the company's liquidity situation, it actually does.

The changes to their credit agreement:


  • Provides certain relief from leverage and fixed charge covenants through March 31, 2011.
  • No change in the pricing grid for the revolving credit agreement.
  • Requires that the Company prepay all principal and interest installments on its Senior Notes otherwise due and payable during 2010, aggregating approximately $24.5 million.
  • Interest rates on the Company’s Senior Notes increases to 9.75%, from an average of 6.8%, until the end of the second quarter of 2011, subject to compliance with debt covenants, and except for the principal and interest prepaid with respect to 2010, which will be prepaid at the interest rate prior to the effectiveness of the amendment.
  • Requires prepayment of $2.0 million in fees related to the Company’s letters of credit otherwise due and payable during 2010.
  • Borrowing availability under the revolving credit agreement is permanently reduced from $160 million to $120 million.

While the reduction in the credit agreement's borrowing capacity sounds bad, and the interest rate has jumped huge on the senior notes, the relaxation of covenants and leverage restrictions will give Saia some room to continue improving its balance sheet, also helped by improved operating metrics.

In conjunction with the equity offering, Saia also lowered earnings guidance significantly, now anticipating a loss of 33cents versus the street's expectation of -12cents.  Much of this is thanks to higher healthcare costs, up almost $2million in the 4th quarter, despite a headcount reduction of 10%!


Copyright 2009 AlphaNinja

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