May 15, 2014
Waste Pro USA is close to changing its funding source for its future investment plans, cutting ties with a long-time investor.
(This story has been updated since it was originally published.)
The Longwood, Fla.-based Waste Pro is using Stifel Financial Corp. to advise the hauler on a debt-based recapitalization plan. And it is ending the five-year investment by Atlanta-based Roark Capital Group, which owned Waste Pro preferred shares that it paid $100 million for in 2009.
Roark’s five-year investment agreement with Waste Pro was to end Sept. 30. “We have the right to call that investment,” says John Jennings, Waste Pro president and CEO, in an interview. “We have elected to do that.”
Roark’s preferred stake was a source of capital for Waste Pro as it expanded. The company had about $160 in revenue five years ago; it has more than $500 million now.
“We used that as capital to grow,” he says. “The preferred equity provision and Roark’s position in Atlanta we felt gave us as a Southeast contractor a good combination.”
It was always nearly certain that Waste Pro eventually would buy out Roark rather than convert its holding to common shares, Jennings says. “My feeling is I want anybody who owns stock to be an active participant in the growth of the company.”
In Waste Pro’s common share makeup, Jennings owns 92 percent of the company, and his employees own the remaining 8 percent.
Roark has long invested in the waste and recycling business. In March, the firm’s Synergy Environmental Corp. bought Central Jersey Waste Recycling Inc., which provides waste and recycling services in Pennsylvania and New Jersey.
Jennings says Waste Pro had been weighing whether to have the new investment be an all-debt provision or for a small equity holding to be part of the new investment infusion. He says Stifel interviewed several dozen prospective new investors.
“As the world has changed, the price of capital really has come down tremendously,” Jennings says.
Jennings and his vice presidents met in mid-May to discuss the possibilities. “I want them to know and have a voice in our decisions.”
He’s confident Waste Pro will have the funding it needs for future plans. “It’s just how you project five years from now, will our interest rates still be what they are? Or will they be double or whatever, because they certainly can’t be lower. So if you can get money at 2 to 5 percent, should we lock it up for a long term, or should we bet on the future?”
Any equity position was always going to be small, he says. “It’s just so attractive the interest rates for debt today.”
But the investment shift isn’t changing Waste Pro’s long-term investment plans, Jennings says. And that includes being close to 100-percent in compressed natural gas (CNG) trucks as possible.
“We won’t ever be 100 percent because there will be some rural areas that just don’t have the gas lines that can accommodate the CNG,” he says. “ But we will convert to CNG, and I would expect that to be an eight to nine year process.”
Waste Pro has 110 CNG trucks on order this year, and that number will accelerate going forward. CNG trucks will comprise 90 percent of the company’s truck purchases, Jennings says.
Waste Pro operates in eight southeastern states with about 75 different locations. It has about 1,800 heavy vehicles, 2,600 employees, more than 2 million residential customers and 40,000 commercial.
Adds Ron Pecora, chief marketing officer for the company, “We continue to grow dramatically each year.”