Genesee & Wyoming to increase revolver commitments by $75 million

By Sara Rosenberg

New York, May 26 - Genesee & Wyoming Inc. is expanding its existing senior revolving credit facility to $225 million from $150 million, with the additional liquidity to be used to help finance the $243 million acquisition of Rail Management Corp.'s rail operations, according to a company news release.

The company plans to draw down $118 million under the expanded revolver at an initial borrowing rate of Libor plus 137.5 basis points.

In addition to the revolver borrowings, the company plans to complete a private placement of $125 million 10-year senior floating-rate notes with an initial rate of Libor plus 85 basis points for acquisition financing as well.

Following the acquisition, Genesee & Wyoming will have about $107 million available under its revolver, which will be available for general corporate purposes, including acquisitions.

As of March 31, pro forma for the debt financing, total debt to capitalization was 51.1%.

The acquisition, which is expected to close on June 1, is subject to customary closing conditions and the expiration of the seven-day notice period required by the Surface Transportation Board.

"The timing and fit of the Rail Management acquisition is exceptional. First, the rail properties are an excellent geographic fit with our Rail Link Region thereby enabling us to reduce costs and increase efficiency. Second, our ability to write-up the tax basis of the acquired entities helps to support a substantial increase in our free cash flow. Third, we are purchasing the assets at a time when we are able to benefit from highly favorable debt market conditions. Fourth, while we are taking on a modest increase in our debt profile, the cash flow from the combined businesses will allow GWI to de-lever rapidly," said Mortimer B. Fuller III, chairman and chief executive officer, in the release.

"Finally, the business is well run, management is strong, the employees are dedicated, the markets served are growing and the assets are in good condition."

Genesee & Wyoming is a Greenwich, Conn.-based operator of short line and regional freight railroads.

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