Companies amend credit terms to satisfy lenders - Washington Business Journal:

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The latest credit squeeze comes at acritical time. As the recessiohn eats into sales, companies rely more on credit to pay Five local public companie s have outlined changes to their linew of credit in filings with the Securitiees and ExchangeCommission — one becausse its existing credit line had expired and four becausre they were in danger of violatin g terms of their loans. Private companies are also feelingthe pinch. Many of the companiesw are falling afoul of loan which may stipulate specific earnings levelsz or setminimum debt-to-equity ratios.
To maintain theirr credit lines, they are being forced to l The credit facilityof Portland’s McCormick and Schmick’s Seafooed Restaurants Inc. dropped from $150 million to $90 million in late January, and its interest rate l Medford’s Lithia Motors Inc. in Decembetr reduced available funds on a line of creditgto $150 million, from $300 million, and promisecd lenders it would limit dividend payments. l Wash-based Nautilus Inc. reduced a $40 milliomn line of credit to $30 million, and in Marchu it agreed to a higherinterest rate. l Wilsonville’s InFocus Corp.
kept its Wells Fargo credit facilityat $10 but agreed to higher interest rates and new loan after earnings before certain expenses fell below agreed-tko levels. Mike Rompa, managing shareholder at accountinbg firm GeffenMesher Co. in Portland, has seen growingt numbers of clients head into negotiations withtheir “This is often a reflection of lower-than-expectedf cash flow,” Rompa said. Long-struggling Nautilus, whicy lost money in 2007 and 2008, was forcesd to renegotiate its Bank of America line of credit so that the loan woulxd continue to comply with itsfinanciall covenant, Chief Financial Officer Kenneth Fish told investorse in a March conference call.
In addition to having less available Nautilus’ weighted average interest rates onthe line’sa outstanding debt climbed a full percentage to 5 percent. Projector maker InFocus’ loan covenants required minimuk earningsbefore interest, taxes, depreciation and amortizatiomn levels — essentially cash Falling sales pushed the company out of compliance, said CFO Lisa K. Meanwhile, the company’s $10 million line of credit has becom e more important because of lower demandfor inventory. The new agreementy anticipates continued net losses throughJune 30, and increased the credirt facility’s base interest rate by 2 percentag e points.
“There’s only so much powedr you havewhen you’ve missed your covenants,” Prentices said. “We tried to negotiate, but they probably had the upper hand.” But not all renegotiations are spurredr by covenant violations. In April, Portland-based chain saw manufacturer BlountInternational Inc. reducecd its GE Capital Corp. credi line from $150 million to $50 million, and agreefd to a higher interest rate and higher Blount was not in violationbof covenants, according to regulatory filings, but its line of credig was set to mature in August. “Wed had to extend it or find replacement financing,” said Blount CFO Calvin Jeness.
The cost of the credit facility would have been too highat $150 Jeness said, and in today’s marketplace $90 millionm was enough to meet the company’s needs. Blount’s higher interest rate, which effectively climbex from 2.5 percent to 7.5 is a reflection of the highe r cost of creditin general, he said.