AEROJET ROCKETDYNE REFINANCES DEBT.
Aerojet Rocketdyne Holdings Inc., the aerospace company that is one of the Sacramento area’s largest employers, said Monday that it will refinance its long-term debt, gaining financial flexibility and saving about $20 million a year in future interest payments.
Aerojet’s lenders agreed Friday to an amended $350 million credit facility, replacing its existing line of credit, and to provide a $400 million term loan. The entire $750 million in financing has an interest rate of LIBOR plus 2.25 percent. The current one-month London Interbank Offered Rate, or LIBOR, is 0.44 percent. That means the current interest rate on Aerojet’s debt would be about 2.69 percent. It is, however, a variable rate, so it will fluctuate with changes in the market.
The company intends to use the new term debt to redeem $460 million of its 7.1 percent interest notes, which are due 2021. That long-term debt is comprised of bonds issued in January 2013 for Aerojet’s $550 million acquisition of Pratt & Whitney Rocketdyne. Aerojet (NYSE: ARJD) intends to redeem those bonds July 18.
That will leave the company with much lower interest rates, overall.
“This is a fantastic deal for our company. We are always open to ways to further optimize our capital structure. Our decision to refinance was driven by a unique opportunity to take advantage of robust debt market conditions so that we have greater flexibility to execute our long-term strategic agenda,” said CEO Eileen Drake, in a news release.
The new $750 million credit facility is collateralized with the company’s assets, including real estate in Canoga Park, Redmond, Wash., and Virginia, treasurer Brendan King said.
Aerojet owns 11,000 acres in eastern Sacramento County, but that land is not part of the collateral for this debt.
The company employs about 1,600 in Rancho Cordova and Folsom. It is keeping its main operations there after recently moving its corporate headquarters from Rancho Cordova to El Segundo in Southern California.