(Reuters) – Railway equipment supplier Greenbrier Cos Inc (GBX.N) said it received a $75 million three-year term loan from Wilbur Ross’ WL Ross & Co LLC and reduced the size of its North American revolving credit facility led by Bank of America.
The WL Ross loan, which contains no financial covenants, will mature in June 2012 and may allow access to capital of up to $150 million, the company said in a statement.
Greenbrier, which makes, repairs and refurbishes railroad freight cars, said the loan proceeds will be used to pay down debt and serve as a platform for future growth.
WL Ross is also a major investor in the largest railcar leasing company in Europe called VTG, which is a customer of Greenbrier, Wilbur Ross, chief executive of WL Ross, said in a conference call with analysts.
Ross, who joined Greenbrier’s board, said his company’s interest in rail is partly because energy and environmental constraints make “steel on steel” freight transport four times more efficient than “rubber on cement” or road transport.
Greenbrier has a joint venture in China, while some WL Ross businesses have a number of factories in China along with a presense in India, he said.
WL Ross’ interest in Greenbrier is a combination of its long-term positive outlook for rail, car building and leasing, and the presense of both the companies in Asia, he added.
Greenbrier posted wider-than-expected losses in the last two quarters and suspended its quarterly dividend to maintain liquidity amid a weak U.S. railcar industry that has been grappling with an oversupply of railcars in the market.
In connection with the loan, Greenbrier has issued warrants to WL Ross to purchase about 3.4 million shares, representing 16.5 percent of Greenbrier’s common shares on a proforma basis, at $6.00 apiece.
WL Ross also plans to buy at least $1.5 million of Greenbrier common stock in the open market.
Greenbrier, which counts activist investor Carl Icahn as one of its stakeholders, told analysts it does not intend to go on an acquisition binge and will focus on cash and liquidity in the near term and until market conditions improve.
As of last July, Icahn had a 5 percent stake in Greenbrier.
AMENDS CREDIT FACILITY
Greenbrier said it has amended its existing North American revolving credit facility led by Bank of America and reduced the size of the facility to $100 million from $290 million.
Although the maturity date of the revolver remains at November 2011, the terms of certain financial covenants have been made more accommodative for Greenbrier, the company said.
The next potential earliest maturity of any significant debt is May 2013, Greenbrier said.
“The combination of the two facilities provides the company ample liquidity, while also diminishing the risk of potential financial covenant issues and related risk of cross-defaults under… various debt obligations,” it added.
As of Feb. 28, outstanding borrowings under the company’s facilities totaled $101.5 million in revolving notes and $3.6 million in letters of credit, according to Greenbrier’s quarterly filing.
Shares of the Lake Oswego, Oregon-based company rose 39 cents to $8.36 in afternoon trade on the New York Stock Exchange. They had touched a high of $8.50 earlier. (Reporting by Bhaswati Mukhopadhyay and Eric Yep in Bangalore; Editing by Himani Sarkar and Deepak Kannan)