CHICAGO — NES Rentals recently completed a $300 million, five-year, asset-based senior credit facility and a $275 million, six-year, second-lien term loan.
“NES has secured a new capital structure to meet the increasing demand for quality rental services in today's growing marketplace,” said NES CEO Andrew Studdert. “Since emerging from bankruptcy in February, we have executed measures to achieve greater operational efficiency and to strengthen NES' financial position and leadership. This financing is a major step in further positioning NES to capitalize on improving economic activity, support a renewed customer focus and achieve sustainable growth.”
In an interview with RER, Studdert added that the refinancing helped launch a “new era” for NES Rentals. “We have a $100 million undrawn line of credit, which we can use for operations and growing fleet,” Studdert told RER. “The refinancing takes away a significant number of covenants, which gives us a lot more flexibility and nimbleness.”
The asset-based senior credit facility provides NES with a $200 million term loan and a $100 million revolving credit line. The new financing plan replaces the existing credit facility NES put in place when it emerged from bankruptcy in February 2004.
“The new credit facilities eliminate the significant debt reduction requirements that were necessary under the exit facility,” added NES' chief financial officer Michael Milligan. “NES now has improved liquidity for operational flexibility, fleet reinvestment and a long-term capital structure. A strategic investment in a quality fleet to better serve our customer base is key to our business, particularly as the non-residential construction industry enters a period of strong, renewed growth.”
In other NES news, the company announced its second quarter results, with total consolidated revenues exceeding the company's forecast. The total revenue of $147.4 million was slightly below the $150.6 million reported for the second quarter of 2003, although the company attributed the difference to the streamlining of branch operations and improvement in its rental fleet.
NES reported a 6-percent to 8-percent rise in year-over-year rental rates, resulting in better revenue utilization.
Although demand for traffic safety services has been below expectations throughout the industry, second quarter revenues for NES' safety business, accounting for 17 percent of the company's revenue, were $32.3 million, an 8 percent increase from the $29.9 million in second quarter revenue last year.
Gross profit for 2Q04 was lower than in 2003, $31 million compared with $37.7 million in 2Q03. The variation is the result of fresh-start accounting asset write-ups that were implemented earlier this year. Still, general margins improved because of branch closings, the consolidation of more than a dozen separate information systems into a single database, the establishment of a shared services center and strategic reductions in NES' rental equipment fleet, officials said.
New CEO Studdert told RER he is pleased with second quarter results. “I'm happy with the rate environment and I'm pleased that utilization is holding,” he said. “Traffic safety is doing well compared to what's going on in the whole industry.”
In other NES Rentals news, the company last month named Rick Juster vice president of assets and planning. The 55-year-old Juster is the former vice president of purchasing for United Airlines, thus continuing NES' tradition of bringing in airline industry executives. CEO Studdert worked with Juster at United Airlines, and former CEO Joseph Gullion also had an airline industry background.
Juster's responsibilities in the newly created position will include enhancing NES' equipment utilization process through refined financial and business analysis, and increasing the efficiency of supplies throughout NES' nationwide rental network.
“[Juster] is an experienced leader with a diverse financial and business analysis background that will help NES successfully manage its equipment operations across a national level,” said Studdert.
During Juster's 20-year career with United Airlines, he was responsible for corporate-wide purchasing, financial planning and analysts, and accounting operations. He served as the controller of the company's information services and led its year-2000 readiness project. From 2000 through 2003, he was vice president of purchasing for the airline.
“NES is moving from a local to a national equipment planning process, as evidenced by the recent creation of a single data center for all rental outlets,” said Juster. “NES now manages its fleet across a nationwide system. My job is to ensure that this process is financially and logistically efficient and rational. NES wants to better manage and utilize its growing fleet, yet keep the unique needs of all our customers at the forefront. The idea is to provide company-wide structure while fostering NES' independent and entrepreneurial philosophy in each rental outlet.”
Chicago-based NES Rentals, No. 5 on the RER 100, has 141 branches in 34 states and Canada.