Intermodal middleman firm Pacer International said it replaced its credit financing arrangements with a new deal that cuts interest rates and fees and shrinks to two from eleven the number of participating lenders.
Pacer's financing will now be with Bank of America and Wells Fargo under a facility that lasts to Dec. 30, 2015. Like the accord it replaces, it is a revolving credit for up to $125 million.
It allows for a $50 million increase under certain conditions but ends any limitations on capital spending and eases some restrictive loan covenants on Pacer's ability to make investments, acquisitions and equity distributions.
John J. Hafferty, executive vice president and chief financial officer for the logistics company, said "this new facility provides Pacer with long-term financing on more favorable terms." The credit covenants, he said, "are now set at levels that will allow us to implement our strategic growth projects as well as realize significant savings on interest costs in 2011."
Pacer was hit hard by the intermodal downturn that began in 2008 and accelerated as the recession deepened and the financial crisis cut into international container trade and domestic freight activity. The company also fought for years to keep customers who were anxious about the looming expiration of a low-priced contract Pacer held with Union Pacific Railroad to sell train space to other intermodal marketers.
But Pacer restructured its operations and struck a deal with UP in 2009 that gave Pacer a cash payment in return for UP closing their agreement early. Its intermodal operations shifted from a big loss in the 2009 third quarter to a gain in the 2010 period.
Now, said Chairman and CEO Daniel Avramovich, "Pacer's ability to enter into this new credit facility reflects the many improvements that we have implemented since August 2009 and the strengthened financial condition of our company. Establishing improved financing arrangements is another milestone in our forward progress that will give us the flexibility to further expand our operations and better serve our customers."
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