Press Releases

New Flyer enters into an Amended and Restated Senior Credit Agreement Maturing April 2014

Winnipeg, Manitoba, Canada − July 27, 2011 − (TSX:NFI.UN) New Flyer Industries Inc. (“NFI”) and New Flyer Industries Canada ULC (“NFI ULC”) (together, “New Flyer” or the “Company”) today announced that  New Flyer Industries Canada ULC and New Flyer of America Inc., NFI’s Canadian and American operating subsidiaries, have entered into an amended and restated credit facility agreement in the amount of US$195 million (the “New Credit Facility”) with The Bank of Nova Scotia and Bank of Montreal, as co-lead arrangers and joint book runners, and a syndicate of leading Canadian and American financial institutions.  The New Credit Facility refinances New Flyer’s previous senior credit facility which was scheduled to mature in April 2012.  The New Credit Facility matures on April 24, 2014 and consists of a US$105 million term loan (including a US$15 million delayed draw loan) and a US$90 million revolver (including a US$55 million letter of credit sub-facility).

In total, initial proposed commitments received from lenders under the New Credit Facility exceeded the required size of the facility by over 15%.  The lending syndicate includes The Bank of Nova Scotia as Administrative Agent, Bank of Montreal as Syndication Agent, Canadian Imperial Bank of Commerce, Bank of America, The Toronto-Dominion Bank, ICICI Bank Canada and Export Development Canada.

Paul Soubry, New Flyer’s President and Chief Executive Officer commented, “We are delighted with the confidence that our lenders have shown in New Flyer by participating in our New Credit Facility.  The New Credit Facility provides us with significantly more financial flexibility to operate and develop our business. We believe that the New Credit Facility together with the successful completion of our conversion to a traditional common share structure through our non-cash rights offering will provide New Flyer with a stronger platform and the flexibility we need to pursue strategic opportunities for continued long-term growth and diversification.”

On closing of the New Credit Facility, New Flyer had drawn US$90 million of the term loan facility to refinance the existing term loan in the same amount under the previous senior credit facility. There were no direct borrowings under the revolving credit facility at closing, however, letters of credit totaling US$14 million were drawn under the letter of credit sub-facility. The US$15 million delayed draw term loan is available to be drawn over the next twelve months and the Company intends to draw these funds to finance certain capital expenditures to enhance manufacturing capabilities.

The New Credit Facility materially relaxes the following financial covenants as compared to the previous credit facility:

  • A relaxed maximum total leverage covenant which has increased from 4.75 to 5.25 times Adjusted EBITDA (as defined in the New Credit Facility);
  • Until December 31, 2011, the addition of a significant cushion of US$7.5 million to the excess cash flow requirement for dividend payments; and
  • The fixed charge coverage ratio threshold for dividend payments has been reduced from 1.25 to 1.20 times Adjusted EBITDA.

The New Credit Facility provides further financial covenant relaxation if NFI’s shareholders (including holders of income deposit securities) exercise at least 50% of the rights issued to them in connection with NFI’s recently announced non-cash rights offering (which would result in a reduction in New Flyer’s third party debt in the amount of at least C$136.8 million) (the “Minimum Condition”). If the Minimum Condition is satisfied, the following further relief to financial covenants would be realized:

  • The excess cash flow cushion would increase to US$15 million (beginning on the date the Minimum Condition is satisfied and ending on September 30, 2012);
  • The fixed charge coverage ratio threshold for dividend payments would drop further to 1.15 times Adjusted EBITDA; and
  • The maximum senior leverage ratio covenant would increase from 2.25 to 2.50 times Adjusted EBITDA.

An accordion feature providing the Company with access to a further US$75 million of term loan facilities to fund strategic growth and revenue diversification initiatives also becomes available if the Minimum Condition and certain other conditions are satisfied. The New Credit Facility also provides for additional headroom with respect to limits on operational activities such as future acquisitions.

Additionally, the New Credit Facility provides for a significant reduction in interest payments, by operation of lower interest margins and by setting the margin levels according to a total leverage test instead of a senior leverage test, which is more favourable to the Company. In connection with the New Credit Facility, New Flyer has rolled over the existing interest rate swap designed to hedge floating rate exposure for the term of the New Credit Facility on the US$90 million drawn term loan. The new interest rate swap fixes the interest rate at 1.90% plus the applicable interest margin until April 2014. In comparison, the hedge in place prior to the closing of the New Credit Facility fixed the interest rate at 2.61% plus the applicable interest margin until April 2012. Based on the interest rate applicable to the term portion of the New Credit Facility and the terms of the swap, management expects that the overall interest costs for the US$ 90 million drawn term loan portion of the New Credit Facility will be less than the amount under the previous credit facility and interest rate swap.

About New Flyer

New Flyer is the leading manufacturer of heavy-duty transit buses in Canada and the United States. The Company’s three manufacturing facilities – in Winnipeg, MB; St. Cloud, MN; and Crookston, MN – are all ISO 9001, ISO 14001 and OHSAS 18001 certified.  The Company currently operates a parts fabrication facility in Elkhart, IN and three parts distribution centers in Winnipeg, MB; Erlanger, KY; and Fresno, CA. A fourth PDC is expected to open in Ontario in 2011.

With a skilled workforce of over 2,000 employees, New Flyer is a technology leader, offering the broadest product line in the industry, including drive systems powered by clean diesel, LNG, CNG and electric trolley as well as energy-efficient diesel-electric hybrid vehicles.  All products are supported with an industry-leading, comprehensive parts and service network. The Company’s income deposit securities are traded on the TSX under the symbol NFI.UN.  Further information is available on New Flyer’s web site at www.www.newflyer.com.

Forward-Looking Statements

Certain statements in this press release are “forward looking statements”, which reflect the expectations of management regarding New Flyer’s future growth, results of operations, performance and business prospects and opportunities.  The words “believes”, “anticipates”, “plans”, “expects”, “intends”, “projects”, “estimates” and similar expressions are intended to identify forward looking statements. These forward looking statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this press release.  Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved.  A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements.  Such differences may be caused by factors which include, but are not limited to, the ability to complete the conversion to a common share structure, competition in the heavy-duty transit bus industry, availability of funding to New Flyer’s customers to purchase buses, parts or services at current levels or at all, competition and aggressive and reduced pricing in the industry, material losses and costs may be incurred as a result of product warranty issues, material losses and costs may be incurred as a result of product liability claims, changes in Canadian or United States tax legislation, reliance on a limited number of key executives who New Flyer may not be able to adequately replace in the event that they leave New Flyer, the absence of fixed term customer contracts and the termination of contracts by customers for convenience, the current “Buy-America” legislation and the Ontario government’s Canadian content purchasing policy may change and/or become more onerous, production delays may result in liquidated damages under New Flyer’s contracts with its customers, New Flyer’s ability to execute its planned production targets as required for current business and operational needs, New Flyer’s ability to generate cash from the planned reduction in excess work in process, currency fluctuations could adversely affect New Flyer’s financial results or competitive position in the industry, New Flyer may not be able to maintain performance bonds or letters of credit required by its existing contracts or obtain performance bonds and letters of credit required for new contracts, third party debt service obligations may have important consequences to New Flyer, the covenants contained in NFI ULC’s senior credit facility and subordinated note indenture could impact the ability of New Flyer to continue to fund distributions and take certain other actions, interest rates could change substantially and materially impact New Flyer’s profitability, the dependence on limited sources of supply, the timely supply of materials from suppliers, the possibility of fluctuations in the market prices of the pension plan investments and discount rates used in the actuarial calculations will impact pension expense and funding requirements, New Flyer’s profitability and performance can be adversely affected by increases in raw material and component costs, the availability of labour could have an impact on production levels, the ability of New Flyer to successfully execute strategic plans and maintain profitability and risks related to acquisitions. New Flyer cautions that this list of factors is not exhaustive.  These factors and other risks and uncertainties are discussed in New Flyer’s press releases and materials filed with the Canadian securities regulatory authorities and are available on SEDAR at www.sedar.com.

Although the forward looking statements contained in this press release are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements, and the differences may be material.  These forward looking statements are made as of the date of this press release and New Flyer assumes no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.

For further information, please contact:
New Flyer Industries Inc.
Glenn Asham, Chief Financial Officer
Tel: (204) 224-1251