TravelCenters of America (NASDAQ: TA) pledged practically all of its assets to secure a $200 million loan to pay for CEO Jonathan Pertchik’s makeover of the business.
It is TA’s second major fundraising effort this year. It sold 6.1 million new shares in the company at $14.61 a share in July after cutting the price by about a third from the original asking price. TA raised about $80.1 million from the sale.
Buyers of those shares have done well. TA shares closed Monday up 3% at $32.98.
The seven-year loan has a 7% interest rate payable in quarterly payments equal to 1% of the principal annually. The balance would be due on the maturity date. TA can prepay the loan after two years at par.
The loan is secured by a pledge of all the equity interests of “substantially all of TA’s wholly owned subsidiaries. Most other TA assets are on the line as well, according to a company press release issued after the markets closed Monday.
TA will use the proceeds for general business purposes. That includes funding of deferred capital expenditures, updates to key IT infrastructure, and growth initiatives in Pertchik’s transformation plan. Pertchik is a veteran turnaround expert hired as CEO a year ago this week.
“By closing this new loan, we have further strengthened our balance sheet and given ourselves increased flexibility in a dynamic capital environment,” he said.
Pertchik’s hired a new chief financial officer and executive vice presidents to oversee restaurants, gaming and convenience stores, corporate development, and information technology. The sweeping reorganization in May included cutting 130 corporate positions.
TA is pursuing franchisees to take over existing truck stops to grow the TA, Petro Stopping Centers and TA Express travel center brands. TA is focused on converting good-quality, well-located independent truck stops to the TA model, Pertchik told FreightWaves in a March interview.
Taking care with loan money
“As we look ahead to 2021, we have the people, the plan, the processes and now the liquidity to advance our transformation playbook,” he said in the press release.
TA is being careful with the loan money, Pertchik said. The travel center network operator has 270 locations in 44 states and Canada. It is managing through the pandemic with little certainty of what lies ahead.