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Teletouch in New Credit Facility With Downtown Capital Partners

February 12, 2013, 07:32 AM

Teletouch Communications, Inc., a U.S. cellular services provider and consumer electronics distributor, announced it entered into a new, two-year, $6 million senior secured asset-based revolving credit facility, with a starting interest rate of 14% per annum, such facility also providing for an additional multiple use, short term loan facility of up to $2 million per loan for special order inventory purchase transactions with DCP Teletouch Lender, LLC, a special purpose entity created by New York-based, Downtown Capital Partners.

The revolver contemplates interest rate reductions of 1% per quarter (to a minimum of no less than 11%) in the event the company achieves certain minimum quarterly EBITDA targets. The term loans component of the DCP Loan Facility is designed to satisfy out-of-cycle customer orders to facilitate inventory purchases at times and prices favorable to the Borrower. The term loans are not a committed credit facility and the financial terms, including interest rates and fees of each of any such Term Loans will be determined on a case-by-case basis and remain entirely within the discretion of the lender. The DCP Credit Facility may be extended by one additional year at the Company’s sole election, providing for an up to three year total term. Teletouch is using the initial funds drawn from the facility to replace and pay-down its original loans and indebtedness with Thermo Credit, pay closing costs associated with the financing; and, use the remainder for general corporate and working capital purposes. New York City-based Bryant Park Capital, Inc. acted as exclusive financial advisor to Teletouch for the transaction.

As prior reported, the Thermo Facility was originally set to mature in January 2013. However, at the start of 2012, Thermo Credit informed the company that it was not in compliance with its own borrowing base facility with Capital One Bank, N.A., and could no longer lend additional monies or fulfill any further revolving credit obligations to the company. Subsequently, the parties entered into various negotiations and agreements, whereby the maturity of the Thermo Facility was reset to August 2012, while the company worked to replace the Thermo Facility altogether.

“Although the process has been extremely challenging, the new $6 million asset-based revolving loan facility, combined with the potential of the additional $2 million-per-transaction stand-by term loan facility, positions the Company well to take advantage of the various components of its emerging wholesale distribution business,” stated T. A. "Kip" Hyde, Jr., president, chief operating officer and director of Teletouch. “Just as important, firmly resolving the ongoing credit matters with Thermo Credit now allows our management team to focus on growing the business, especially with the greater flexibility and additional credit lines that our new lender provides. Completing this new credit facility was a team effort, and we look forward to growing the business together.”

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