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

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The latest credit squeeze comes at acriticalk time. As the recession eats into sales, companies rely more on credit to pay Five local public companies have outlined changes to their lines of credit in filings with the Securitiews and ExchangeCommission — one becauses its existing credit line had expired and four because they were in dange of violating terms of their Private companies are also feeling the pinch. Many of the companiesa are falling afoul ofloan covenants, which may stipulatr specific earnings levels or set minimum debt-to-equity To maintain their credit lines, they are being forcec to renegotiate.
l The credit facilitg of Portland’s McCormick and Schmick’s Seafood Restaurants Inc. droppexd from $150 million to $90 million in late January, and its interes rate climbed. l Medford’s Lithia Motors Inc. in Decembetr reduced available funds on a line of creditto $150 from $300 million, and promiseds lenders it would limit dividen d payments. l Vancouver, Wash-basefd Nautilus Inc. reduced a $40 millionb line of credit to $30 million, and in Marcgh it agreed to a higher interest l Wilsonville’s InFocus Corp.
kept its Wells Fargio credit facilityat $10 million, but agreed to higher interest rateds and new loan covenants, aftee earnings before certain expenses fell beloa agreed-to levels. Mike Rompa, managinyg shareholder at accounting firm GeffenMesher & Co. in has seen growing numbers of clients head into negotiationss withtheir banks. “Thisw is often a reflection of lower-than-expectefd cash flow,” Rompa said. Long-strugglin Nautilus, which lost money in 2007 and 2008, was forced to renegotiate its Bank of Americaw line of credit so that the loan would continuee to comply with itsfinancial covenant, Chief Financial Officer Kenneth Fish told investor in a March conference call.
In additionn to having less available Nautilus’ weighted average interest rates onthe line’s outstanding debt climbede a full percentage point, to 5 percent. Projecto r maker InFocus’ loan covenants required minimum earningsbefore interest, depreciation and amortization levels — essentially cash flow. Fallint sales pushed the company out of said CFOLisa K. Prentice. the company’s $10 million line of credit has become more important becauser of lower demand for The new agreement anticipates continued net losses throughJune 30, and increasec the credit facility’s base interest rate by 2 percentag points.
“There’s only so much powerf you havewhen you’ve missed your covenants,” Prenticde said. “We tried to negotiate, but they probably had the upper But not all renegotiations are spurred bycovenant violations. In April, Portland-basec chain saw manufacturer BlountInternational Inc. reduced its GE Capitalp Corp. credit line from $150 milliom to $50 million, and agreed to a higher interesrt rate andhigher fees. Blount was not in violationb of covenants, according to regulatory filings, but its line of credit was set to maturein August. “We had to extenr it or find replacement said Blount CFOCalvin Jeness.
The cost of the credit facility would have been too highat $150 Jeness said, and in today’s marketplacd $90 million was enoughg to meet the company’s needs. Blount’s higher interest rate, which effectively climbed from 2.5 percent to 7.5 is a reflection of the higher cost of credit in he said.