NES Rentals last week completed a $300 million, five-year, asset-based senior credit facility and a $275 million, six-year, second-lien term loan.
“NES has secured a new capital structure to meet the increasing demand for quality rental services in today’s growing marketplace,” said NES CEO Andrew Studdert. “Since emerging from bankruptcy in February, we have executed measures to achieve greater operational efficiency and to strengthen NES’ financial position and leadership. This financing is a major step in further positioning NES to capitalize on improving economic activity, support a renewed customer focus and achieve sustainable growth.”
In an interview with RER, Studdert added that the refinancing helped launch a “new era” for NES Rentals. “We have a $100 million undrawn line of credit, which we can use for operations and growing fleet,” Studdert told RER. “The refinancing takes away a significant number of covenants, which gives us a lot more flexibility and nimbleness.”
The asset-based senior credit facility provides NES with a $200 million term loan and a $100 million revolving credit line. The new financing plan replaces the existing credit facility NES put in place when it emerged from bankruptcy in February 2004.
“The new credit facilities eliminate the significant debt reduction requirements that were necessary under the exit facility,” added NES’ chief financial officer Michael Milligan. “NES now has improved liquidity for operational flexibility, fleet reinvestment and a long-term capital structure. A strategic investment in a quality fleet to better serve our customer is key to our business, particularly as the non-residential construction industry enters a period of strong, renewed growth.”
In other NES news, the company announced its second quarter results, with total consolidated revenues exceeding the company’s forecast. The total revenue of $147.4 million was slightly below the $150.6 million reported for the second quarter of 2003, although the company attributed the difference to its streamlining of branch operations and improvement in its rental fleet.
NES reported a 6 percent to 8 percent rise in year-over-year rental rates, resulting in better revenue utilization.
Although demand for traffic safety services has been below expectations throughout the industry, second quarter revenues for NES’ safety business, accounting for 17 percent of the company’s revenue, were $32.3 million, an 8 percent increase from the $29.9 million in second quarter revenue last year.
Gross profit for 2Q04 was lower than in 2003, $31 million compared with $37.7 million in 2Q03. The variation is the result of fresh-start accounting asset write-ups that were implemented earlier this year. Still, general margins improved because of branch closings, the consolidation of more than a dozen separate information systems into a single database, the establishment of a shared services center and strategic reductions in NES’ rental equipment fleet, officials said.
New CEO Studdert told RER he is pleased with second quarter results. “I’m happy with the rate environment and I’m pleased that utilization is holding,” he said. “Traffic safety is doing well compared to what’s going on in the whole industry.”
Chicago-based NES Rentals is No. 5 on the RER 100.
