Production Resource Group, the entertainment technology mega-company that includes Entolo, Fourth Phase Lighting, and ProMix among its holdings, has completed a major refinancing deal. As of February 21, a press release announced, PRG has “closed two new credit facilities in an aggregate amount of $125 million with GMAC Business Credit LLC as agent. GMAC Business Credit is a member of the GMAC commercial finance group, a multibillion-dollar asset-based lending source owned by GMAC. GMAC is a wholly-owned subsidiary of General Motors, the world's largest auto maker.”
What this all means, says Jere Harris, head of PRG, is, “Basically the company has refinanced its total debt. We've reduced our debt by $80 million. Previously, it had $190 million outstanding. Today, we have approximately $110 million.”
In addition, two PRG companies, Signal Perfection Ltd and Ancha, have been spun off to create a new company, SPL Integrated Solutions. Harris adds, “Chad Gillenwater will remain in charge and the company will be owned by myself, Boston Ventures, and members of the management.” Boston Ventures is the original equity sponsor of PRG.
The reason for the spinoff, says Harris, is, “As we grew we realized that we wanted PRG to be an entertainment services company. SPL has grown away from the entertainment services model. The company will still be a major installer of sophisticated sound systems, but a major portion of its business has become intelligent technology — corporate boardrooms, stadiums, high-level meetings for Fortune 500 companies.” In the new arrangement, he adds, “PRG will focus on my core expertises — the lighting, audio, and scenery businesses — and SPL will focus on high-tech integrated solutions.”
When asked about plans to pay off the rest of PRG's outstanding debt, Harris says, “When you enter the world of leverage, which currently every major service company in the industry has done, the questions are do you have a plan or are you going to public. We have no immediate plans for that. At this level of debt, the company is extremely healthy and well-secured. Two or three years ago, you could finance anything; in today's market, it's almost impossible. The fact that we were able to do this in today's marketplace is a sign that the banks are very comfortable with our ability to perform at these levels of debt.”
Looking to the future, Harris points to retail and trade show exhibits as particularly attractive new markets. While noting that he isn't a professional forecaster, he says about the industry, “I think growth will be somewhat limited from here forward. None of the rental companies are doing particularly well, financially. That's why having less debt allows us to weather bad times.”
The main issue these days, he suggests, is a certain amount of market saturation. “There are only so many Source Fours needed in the world,” he says. “Of course, there will be some new technologies. As Jim Bornhorst [of Vari-Lite] said at the last EDDY Awards, the guy who builds the first $1,000 automated fixture with all the doodads on it will win the game.”