Telect gets $8.5 million in financing

Liberty Lake-based Telect Inc. has secured an $8.5 million loan and credit line with Wells Fargo Bank, company officials said Monday. The financing is part of the troubled manufacturer’s plans to return to profitability for the first time since 2000.

Telect, which makes an assortment of telecommunications connection equipment, is trying to overcome a three-year downturn that cost more than 1,000 local jobs, said company Vice President and Chief Financial Officer Stan Hilbert.

Landing the financing “is indicative of our renewed financial strength and part and parcel of our re-emergence from the past three tough years,” Hilbert said Monday.

In 2000 — during the telecom boom — privately owned Telect soared to about $300 million in sales and grew to more than 1,200 jobs at its Liberty Lake headquarters. It projected 25 percent growth in 2001.

But then the telecom industry worldwide imploded, and Telect started laying off workers as its revenue fell.

Today Telect has about 215 workers in Liberty Lake and another 360 at production sites in Mexico and Poland.

In 2002, Telect restructured its debt into a 10-year loan with Bank of America. But to get that loan in the middle of the telecom-sector meltdown, Telect had to pay interest rates that were well above prime, said Hilbert.

The Well Fargo loan pays off the Bank of America loan and replaces it with a $2.5 million, three-year loan at much better rates, he said. Wells Fargo also offered a $6 million line of credit as part of the deal.

“We will save at least $30,000 a month under the new terms,” Hilbert said.

In a press release, Wells Fargo’s Pacific Northwest CEO John Rindlaub said, “It’s gratifying to see Telect’s turnaround and progress in their business. Telect has strong proven leadership, a great culture, and competitive products, and we look forward to a long-term partnership with this industry leader.”

Hilbert said the company is seeing growth in orders, and its likely profitability this year was a clear factor in securing the financing from Wells Fargo.

In 2004, Telect expects to post a profit on revenue of between $67 million and $70 million. Last year, in contrast, it generated about $67 million in revenue but lost money due to continuing restructuring costs, Hilbert said. Telect’s revenue was $70 million in 2002, and $140 million in 2001.

“For now,” Hilbert said, “we’re seeing a general economic rebound in the telecom industry. Things have stabilized here in Liberty Lake. And the growth we’ve made in recent months has been primarily in Mexico,” he said.