RBC RBC Bearings Incorporated

Regal Beloit Corporation (RBC) recently completed its $500 million five-year unsecured revolving credit facility for general corporate purposes.

This new facility will replace the previous credit facility of $500 million, which is due to expire in April 2012.

Under the previous credit facility, the company had to pay interest on the borrowed amount, based on LIBOR (London Interbank Offered Rate) plus an applicable margin. The margin was derived from the ratio of senior funded debt to EBITDA (Earnings before interest, taxes, depreciation, and amortization). Additionally, Regal Beloit paid a commitment fee on the unused amount, contingent upon the ratio of senior funded debt to EBITDA.

At the end of the first quarter of fiscal 2011, the company was indebted to pay $2.8 million under the revolving credit facility, whereas there was no outstanding balance at the end of fiscal 2010.

As of April 2, 2011, long-term debt was $430.8 million versus $428.3 million in the prior quarter. Net debt-to-total capital ratio was 10.1%.

Regal Beloit is a manufacturer and marketer of branded mechanical and electrical motion control and power generation products serving markets worldwide. The company has established manufacturing, sales, and service facilities throughout the U.S., Canada, Mexico, Europe and Asia.

We believe that Regal Beloit’s aggressive acquisition policy leads to technological and geographical expansion. The company completed nine acquisitions from fiscal 2008 to 2010. However, the rise in raw material prices (copper and steel) could diminish profits.

We currently have a Neutral recommendation on Regal Beloit. Our recommendation is supported by a Zacks #3 Rank, which translates into a Hold rating.

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