Gerdau Ameristeel Announces Amendment of Term Loan
Monday , June 22, 2009 09:26ET
TAMPA, FL, Jun 22, 2009 (Canada NewsWire via COMTEX) -- Gerdau Ameristeel Corporation (NYSE: GNA; TSX: GNA) today announced that it has entered into an agreement with the lenders of the Company's Term Loan Facility which provides temporary flexibility with respect to the facility's covenants. The Term Loan Facility currently has US$ 2.6 billion of borrowings outstanding and Gerdau S.A. and certain of its Brazilian affiliates have guaranteed the Term Loan Facility since its inception in 2007.
The Term Loan Facility originally required the Company's majority shareholder, Gerdau S.A., (on a consolidated basis, including the Company) to maintain a ratio of consolidated EBITDA to total interest expense of more than 3.0 and a ratio of consolidated total debt to EBITDA of less than 4.0. The amendment revises the financial covenants so that they require Gerdau S.A. (on a consolidated basis, including the Company) to maintain a ratio of consolidated EBITDA to net interest expense of more than 2.5 and a ratio of consolidated net debt to EBITDA of less than 5.0.
The amendment is effective immediately and the revised covenant levels will remain in effect until September 30, 2010 unless cancelled by the Company prior to that time. The revised covenant levels can be cancelled by the Company at any time without penalty.
The amendment also revises the interest charged on the outstanding borrowings if and when the financial covenants originally contained in the facility are not met. Under such circumstances, the interest rate charged would increase based on certain conditions. After September 30, 2010 or upon the Company's cancellation of the revised covenants if sooner, the interest rate increase would terminate.
The total cost of the amendment is expected to be between US$ 12.8 million and US$ 41.5 million, depending on the timing of any interest rate increase. The amendment does not affect the outstanding amount of borrowings under or the original amortization schedule of the Term Loan Facility.
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