Valassis enters into interest rate swap agreement through 2012
Monday, January 11, 2010
Press release from the issuing company
LIVONIA, Mich. -- Valassis, one of the nation's leading media and marketing services companies,announced today that it has entered into an 18-month forward-starting interest rate swap agreement with JPMorgan Chase Bank, National Association as the counterparty. The swap agreement has an initial notional amount of $300.0 million. The Company entered into the swap agreement to fix the interest rate for $300.0 million of its variable rate debt under its senior secured credit facility effective Dec. 31, 2010, which is the expiration date of the Company's existing interest rate swap agreements. The notional amount of $300.0 million amortizes by $40.0 million at the end of each quarter to $100.0 million for the quarter ended June 30, 2012. The swap agreement terminates on June 30, 2012.
Under the swap agreement, the Company is required to make payments at a fixed three-month LIBOR interest rate of 2.005%, plus an applicable margin of 1.75%, for an effective rate of 3.755% per annum to the counterparty on an initial notional amount of $300.0 million in exchange for receiving variable payments based on the three-month LIBOR rate for the same notional amount. The Company may enter into additional swap transactions in the future from time to time.
"Given the current global economic uncertainty, we are pleased to fix the interest rate for a substantial portion of our floating debt, through the middle of 2012, at a forward interest rate near the 20-year low," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer.
In 2007, Valassis entered into interest rate swap contracts to fix three-month LIBOR through Dec. 31, 2010. At Sept. 30, 2009, these contracts covered a notional amount of $447.2 million at a three-month LIBOR rate of 5.026%, plus an applicable margin of 1.75%, for an effective rate of 6.776%. Valassis had $512.4 million outstanding under its senior secured credit facility on Sept. 30, 2009.
Under the senior secured credit facility, the Company has no material debt maturities scheduled until 2014. For more details on our capital structure, see Valassis' most recently filed 10-Q.