Capital will drive deals
BERWYN, Pa.--Sonitrol announced a new $135 million senior credit facility in late June--capital that will be used to support the company's drive to acquire additional franchise locations.
The facility, comprised of a $95 million term loan and a $40 million revolving credit line, was arranged by Wachovia Bank and placed with previous lender Merrill Lynch Capital, and new lenders Jefferies Babson Finance, Capital Source and LaSalle Bank. The five-year facility replaced the company's previous $85 million senior credit facility held by GE Capital.
Since three private equity firms purchased the company from Tyco International for $125.5 million in 2003, it has been a period of recapitalization, said Tom Breslin, senior vice president and chief financial officer of Sonitrol.
"We obviously incurred some debt to acquire the company," Breslin said. "But our performance since the acquisition has been very strong and we have a nice strong balance sheet."
Breslin said the new credit line is "a better facility for the company all around" due to better interest rates and access to additional capital.
Over the past six months, the company has repurchased franchises in targeted cities to build a wider corporate network and the new facility secures funds to be used for the initiative.
"We refinanced the debt acquired to have access to additional capital to perform acquisitions," said Breslin. "We are highly focused on acquiring folks in our franchise network."
According to Karen Eriksen, marketing communications manager with the company, Sonitrol purchased four franchises--Long Island, N.Y., Miami, San Bernadino, Calif., and most recently, Crossville, Tenn.--since November 2004.
The company, which currently owns 50 franchise territories in 14 states out of the 137 franchise-owned areas in the United States, will look to acquire branches that are contiguous to its current corporate branches, as well as those in major cities. Breslin also said bringing franchise locations back to being corporately owned makes it simpler to sell to larger clients, especially those with multiple locations.
"It makes it more seamless for the customer," Breslin said. "We don't have any concerns that our franchises will do as good of a job as we do, there is just a little more coordination involved with a multi-site customer."