LESCO plans to sell its receivable portfolio to a unit of General Electric as part of a broader restructuring of debt. The company also also plans a refinancing of its revolving credit facility, a buy-out of its interest rate swap agreement, and a buyback of its preferred stock.
LESCO plans to sell its accounts receivables portfolio to General Electric Business Credit Services for $55 million and will contract out its private label credit program through GE. LESCO expects to close the transaction by the end of the first quarter and will use the proceeds to reduce debt. LESCO expects to incur a one-time charge in the range of $2 million to $3 million in connection with the agreement.
LESCO also has engaged PNC Bank to arrange a three-year, $50 million senior secured credit facility to replace the company's existing bank loan facility. LESCO expects to record a charge of $1.1 million to write-off the deferred financing costs of the existing credit facility.
In addition, LESCO intends to buy-out and terminate its current interest rate swap agreement for $1.3 million and to buy back its preferred stock for $1.7 million. The swap buy-out is expected to close concurrently with the new credit facility and should result in a one-time charge of $1.3 million. No charge will be necessary for the preferred stock buy-back.
LESCO CEO Michael DiMino said the combination of agreements will allow the company to reduce its debt by more than $50 million and will increase its financial flexibility. DiMino said the actions also will allow the company to open new service centers without incurring the additional working capital necessary to finance its own accounts receivable portfolio.
Besides providing details of the debt restructuring, LESCO forecast that its final earnings for 2003, likely will range from 20 cents to 25 cents per diluted share before any charges related to the GE transaction, swap buyout or the revolving credit refinancing. That range is an increase from LESCO's previous guidance of 15 cents to 20 cents per diluted share.