Interview: Tecnoglass CFO Santiago Giraldo Discusses The Company’s New $300 Million USD Credit Facility + Land Deal For New Factory

Tecnoglass (NASDAQ: TGLS), the Barranquilla based manufacturer of architectural glass and aluminum products just closed on a $300 million USD credit facility from a syndicate of banks. The new financing will save the company millions on interest. In this Finance Colombia exclusive interview with CFO Santiago Giraldo, he also explains the company’s innovative stock-for-land real estate deal for the site of their new factory, part of a joint venture with Saint Gobain. The interview transcript is below.

Finance Colombia: I’m here with Santiago Giraldo, the CFO of Tecnoglass; on NASDAQ, that’s TGLS. Congratulations, you guys just closed on a $300 million-dollar (US) credit facility. So first, maybe you can tell us a little bit about the motivation behind that financing package.

Santiago Giraldo: We are very excited with the outcome, it was definitely a transformational transaction for the company. If you look at the way that we were being financed before and what we are going to be able to do with this facility moving forward is day and night really. I mean we are going to save about 11 million dollars of interest on a yearly basis, which is a substantial amount, and the driver was really trying to be more seen as an US-based company, right? I mean I think we were being financed as a LatAm company but the reality is that Tecnoglass does over 90% of its business into the US, and as a growing part of the business, it could become 95% over time, I don’t know, but the idea behind this new structure was to basically be able to approach existing and new relationship banks with the idea that Tecnoglass should be able to finance itself in the same way as its US-based peers, right? And I think it was a very successful outcome seeing that five new US and European based banks were able to recognize that and were able to recognize our competitive advantages and what we are doing, even in a very difficult time so that was the main driver and as a result of that we are shaving 450 basis points out of our financing costs which is which is great.

Finance Colombia: I think it’s a real vote of confidence, I saw that BBVA is the leading administrator and then you’ve got ING Bank, you’ve got Citizens Bank, which is a US bank, Sabadell is taking part in it, so I do think that that speaks to investor confidence. Now it’s in two parts, right? There’s a revolving part and there’s a term loan part of that…how’s that structured?

Santiago Giraldo: Right, so our outstanding debt right now is about $240 million, so what we are thinking about doing is taking out all the non bond debt, which we have about $30 million or so and we are going to do that at the end of this month, and then when the call premium on the bond falls off or falls down in January we are going to take out the bonds so there’s going to be two drops on the term loan and that’s going to total about $240-250 million with some cash going to the balance sheet and then we are going to have a five-year committed $50 million revolver, which is not something that you typically see with LatAm corporates, to have a committed revolver but you know given everything that we just saw happening this year I think it makes perfect sense to have that financial flexibility to be able to have that pocket of money to tap into on a committed basis…we are going to have that extra $50 million dollar facility in there for working capital needs, for opex or any other kind of one-off strategic transaction if it were to take place.

Finance Colombia: Smart, and you know, speaking of that I noticed that you guys also were able to close on a land parcel and you were able to do that with really no, obviously no bank financing but no cash as well, you were able to do kind of an innovative structure to that transaction, right?

Santiago Giraldo: Yes, so that was the last piece of the Saint-Gobain transaction we were also excited to complete that, if you recall we did an equity raise last year where we raised about $35 million dollars and there was a land contribution that was pending so we were able to do that in exchange for shares as opposed to cash. The sellers wanted to take shares as opposed to cash given how we view that the shares are very undervalued right now and there is still kind of a lot of upside to them and hopefully as we complete this refinancing and report results moving forward we are going to see these shares kind of coming back to where they need to be but that was that was the driver so yes, you’re absolutely right I mean, on an absolute basis we are going to be able to save that cash to reinvest in the business and we are able to do this at attractive terms for the company because if you look at the price of the shares that were used to pay for that land, they were issued at a 33%t premium over the closing price when the transaction took place.

Finance Colombia: Well it sounds like not only a win-win situation, it preserves cash flow, it reminds me of—In the US where we would see a lot of creative financing, but it also speaks to that confidence, not just you know, the financing packages speaks to international investor confidence and US investor confidence, but then to be able to close on a deal like that it speaks to even local investor confidence, and I think that there’s a lot more awareness of Tecnoglass locally as one of the largest companies in the country, but still with your growth prospects being in the United States and still having a relatively small part of the market, the upside potential is really large.

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