Casella plans debt restructure
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By Bruce Edwards STAFF WRITER - Published: June 26, 2009
Casella Waste Systems Inc., weighed down by $562.5 million in debt, hopes to raise additional cash as part of a plan to restructure its debt.
The company's financial shape has raised a red flag with its independent public accounting firm.
The Rutland-based company noted in its filing this month with the Securities and Exchange Commission that its independent public accounting firm "expressed doubt about Casella's ability to continue as a going concern" based on an audit of its fiscal 2009 results.
Casella announced Wednesday that it hopes to reverse the assessment by its accounting firm once it closes on a $205 million bond sale.
The proceeds from the sale will be used to repay a portion of debt under the company's existing senior secured credit facility.
Casella spokesman Joseph Fusco said Thursday the opinion issued by the accounting firm is a "formality" because the company's debt falls within a year of its repayment due date, which is April 30, 2010.
"Whenever your debt comes due within one year, for accounting purposes you have to account for it as a current liability," Fusco said.
And since Casella's current liabilities exceed its assets, Fusco said under accounting rules the company's auditors are required to offer an opinion questioning the company's future viability.
Fusco said the company has borrowed $325 million of its $525 million senior secured credit facility, which includes a revolving line of credit and a term loan.
Casella noted in Wednesday's announcement that the bond offering is conditioned on other factors that will allow the company to restructure its line of credit.
Fusco said the company probably would have refinanced its debt sooner if not for the collapse of the global credit markets.
Asked about the prospect of selling its bonds in the marketplace, Fusco said the bond market was one of the bright spots "in the world of finance."
Kevin Austin, a broker with the Rutland office of Moors & Cabot Financial Services, said Casella's plan to raise additional capital will give the company some breathing room.
"It may help because it's going to extend out the maturities a little bit on some of the stuff that's probably coming due in a year or so," Austin said. "So that may make it look a little better on paper but it's still a lot of debt."
Casella's profits and stock price have plummeted along with the global recession.
The company has been hit hard by a nosedive in commodity prices for recyclables. Landfill volumes were also down in fiscal 2009 as a result of a slowdown in construction activity.
The company posted a fiscal 2009 loss of $68 million. Its stock price fell to a 52-week low of 53 cents a share but has since rebounded slightly. The stock closed Thursday up 3 cents to $2.29 a share.
bruce.edwards@rutlandherald.com
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