Seneca Gaming Corp. reduced its overall borrowing costs by refinancing $500 million of its bond debt with a mix of newly issued notes and lower-cost bank borrowings, the tribal-owned gambling company said Thursday.
Seneca refinanced $500 million in senior notes that carried a 7.25 percent coupon rate and were set to mature in 2012 with $325 million in new bond debt and lending agreements that allow the company to access up to $225 million in bank borrowings.
With the refinancing, Seneca extended the maturity of its bond debt through 2018. Even through the newly issued bonds carry an 8.25 percent coupon rate — 1 percentage point higher than the debt they replaced — the company also was able to reduce its overall borrowing costs by shrinking the bond component of its debt and adding more bank borrowings, which carry a lower interest rate.
Overall, Seneca Gaming was able to reduce its interest rate on its total borrowings to less than 7 percent, which is slightly less than the 7.25 percent rate on the series of bonds that were refinanced, said David Sheridan, the companys chief financial officer.
Under the refinancing, Seneca sold $325 million in new senior notes. It also secured a five-year bank credit facility that totals $225 million, composed of a $175 million, five-year term loan that was used to repay the old bonds, along with $50 million in borrowing capacity that replaces its similarly sized line of credit.
Seneca was able to lower its overall borrowing costs because more of its total debt now is in the form of bank borrowings, which carry an initial interest rate of about 3.25 percent. The benchmark for those bank borrowings, currently the 30-day London Interbank Offered Rate plus 2.75 percentage points, will drop as Seneca Gaming reduces its overall debt.
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