Tenon beefs up credit line with US$70 mln banking facility

Tenon, the wood mouldings company controlled by former Fletcher Challenge unit Rubicon, boosted its funding lines, signing up to a bigger banking facility as it seeks to cash in on the US housing recovery.

The Auckland-based company signed a five-year, US$70 milion facility, adding PNC Bank National Association to its banking syndicate with existing lenders Bank of New Zealand and Comerica Bank, it said in a statement. That replaces its existing US$54 million facility.

Tenon will have to meet a short-term quarterly covenant until March 31, where cumulative earnings before interest, tax, depreciation and amortisation are at least US$7.5 million in the 12 month period. The company reported EBITDA of US$5 million in the 12 months ended June 30, turning from an EBITDA loss of US$3 million, and is seeking to double that in the 2014 financial year.

“We have been actively reviewing our existing funding, as it is important that in the quickly improving key US market for our products we have sufficient flexibility to take advantage of the expected growth in our business,” chairman Luke Moriarty said. “The new facility does that, and it will allow Tenon to fully participate in the strengthening US housing recovery.”

Tenon’s trading performance is closely tied to demand in America’s housing market, which is emerging from the devastation wreaked by the sub-prime mortgage debacle with US housing starts up 25 percent, sales up 26 percent and existing home prices up 16 percent in the year ended June 30.

The company had net debt of US$49 million as at June 30, with annual finance costs of US$4 million in the 2013 financial year.

The new facility is made up of a US$59 million revolver line and an US$11 million amortising term loan, it said.

The shares were unchanged at $1.33 yesterday, and have climbed 60 percent this year.

(BusinessDesk)