EAC Increases Credit Facility - Analyst Blog


Erickson Air-Crane Inc. ( EAC ) after a successful negotiation with financial institutions was able to enhance its five-year revolving credit facility to $125 million. On May 2, the company entered into a $100 million, five-year revolving credit facility with a group of financial institutions.

This credit facility will carry an interest rate of 325-450 basis points over the London Interbank Offered Rate ("LIBOR"). Erickson Air-Crane intends to use this credit facility for general corporate purposes.

We believe this new credit facility will allow Erickson Air-Crane to fund a portion of its back-to-back acquisitions announced in May 2013. These acquisitions are a part of the company's strategy to expand inorganically. Erickson Air-Crane expects these newly acquired assets to be immediately accretive to its earnings.

Moreover, the enhanced credit facility could also be used to pursue organic growth objectives. Erickson Air-Crane will have adequate funds to diversify into other end markets and expand its reach in geographical areas.

The long-term debt-to-capital ratio of the company is 31.5%, higher than the peer group average of 24.7%. However, Erickson Air-Crane currently trades at 8.67x 12-month forward earnings, a 39.1% discount to the peer group average of 14.24x. In addition, its ROE in the trailing twelve months is higher than the industry average of 15.5%. This signifies that the financial position is strong enough to meet its debt obligations.

Erickson Air-Crane could also utilize a portion of the funds raised from the issue of senior notes to replenish its credit facility.

Erickson Air-Crane currently retains a Zacks Rank #1 (Strong Buy).  In addition to Erickson Air-Crane other defense operators worth accumulating now are Wesco Aircraft Holdings, Inc. ( WAIR ), Elbit Systems Ltd. ( ESLT ) and Alliant Techsystems Inc. ( ATK ). All these companies presently carry a Zacks Rank #2 (Buy).

ALLIANT TECHSYS (ATK): Free Stock Analysis Report

ERICKSON AIR-CR (EAC): Free Stock Analysis Report

ELBIT SYSTEMS (ESLT): Free Stock Analysis Report

WESCO AIRCRAFT (WAIR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ATK , EAC , ESLT , WAIR



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