Flatbed truckload provider Daseke (NASDAQ: DSKE) announced Wednesday it has favorably refinanced its term loan. The transaction lowers the outstanding balance, reduces annual interest payments and extends the maturity.
The $484 million loan was paid down to $400 million with available cash on hand and the maturity has been extended by four years to March 2028. The new loan has an interest rate of LIBOR plus 400 basis points, 100 bps lower than the previous loan. The interest rate floor was also lowered by 25 bps to a total of 75 bps.
The lower debt balance and new all-in rate will reduce annual interest expense by more than $8 million. Daseke recorded nearly $45 million in interest expense during 2020. The press release said the company’s net debt leverage ratio is estimated to be 2.7x.
The transaction closed Tuesday with JPMorgan Chase Bank (NYSE: JPM) servicing as the sole bookrunner.
“We are pleased with the improved terms of the new Term Loan B, which were supported by the company’s improved economic performance and unique competitive positioning,” stated Daseke CFO Jason Bates in a press release. “Execution against our strategic plan over the last six quarters has significantly enhanced our operational and financial performance and helped us fortify our balance sheet and meaningfully improve credit metrics.”
The company previously undertook several turnaround initiatives aimed at improving margins, increasing cash flow generation and lowering debt. Those efforts included consolidating its network of separately operated flatbed fleets from 16 to nine, divesting its oil rig transportation segment, disposing underutilized equipment, reducing headcount and adding to the executive roster.
Daseke’s turnaround is also being aided by improving fundamentals in the flatbed TL market, which has seen capacity tighten and rates move higher. Tender rejections from carriers now stand at 15%, almost twice the year-ago level as industrial activity continues to recover.
The Purchasing Managers’ Index increased 2.1 percentage points in February to 60.8%, the ninth consecutive month the manufacturing proxy was in expansion territory. Industrial production continues to see year-over-year declines narrow as well. In January, the dataset was up for the fourth time in a row as manufacturing output climbed 1% sequentially.
Daseke plans to increase its revolving asset-based facility by $50 million, increasing total capacity to $150 million. The $84 million debt reduction used less than half of the company’s $176 million cash balance as of year end.
In conjunction with the refinance, debt ratings agencies Moody’s and S&P Global upgraded Daseke’s risk profile.
“The better cost of debt capital and greater financial flexibility under the new term loan will help serve strategic needs and the pursuit of accretive growth opportunities. We remain committed to further advancing our business transformation and driving sustainable top-line and profitability growth,” Bates concluded.
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