The provider of water dispensers and bulk bottled water announced that it has received a commitment from a senior lender to enter into a new long-term $20 million senior revolving credit facility. Primo also noted that it expects to close a term loan for up to an additional $15 million with a separate lender. Investors will want to know that the second loan mentioned is secured by certain fixed assets of the company.
The credit facilities are expected to have a four-year term and will include customary terms and covenants and should close within 30 days, according to Primo. As far as the “use of proceeds” the company plans to pay off its existing senior credit facility and will use any remaining funds for general working capital purposes.
Thomson Reuters has only two estimates, but it is expected to lose money this quarter and the company is expected to make only $0.04 EPS in all of 2012.
The liquidity boost here is not without risk, but the stock of Primo Water is up 35% at $2.16 on 4-times normal trading volume after only about an hour of trading so far this Friday. Even after the pop, the market cap here is only about $52 million. We would note that this company carries almost no cash on its balance sheet.
To show just how bad this has been, the 52-week trading range is $1.50 to $16.00. Investors often cheer any liquidity coming into a troubled company, even if there are risks associated with the infusion.
JON C. OGG
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