Business Context and Reporting Period
Ramaco Resources, Inc. filed this Form 8-K on November 2, 2018, to report the execution of a new Credit and Security Agreement. The filing details a material definitive agreement entered into with KeyBank National Association and other lenders to establish a new credit facility.
Key Financial Metrics and Debt Structure
The filing establishes a new Credit Facility with the following terms:
- Total Commitment: $40.0 million aggregate initial commitment.
- Term Loan: $10.0 million.
- Revolving Line of Credit: $30.0 million.
- Maturity Date: November 2, 2021.
- Interest Rates (Term Loan): Base Rate + 3.75% or LIBOR + 4.75%.
- Interest Rates (Revolving): Base Rate + 1.75% or LIBOR + 2.35%.
- Borrowing Base (Line of Credit): 100% of eligible cash, 85% of eligible accounts receivable, and 65% of eligible coal inventory, less required reserves.
The filing text does not provide current revenue, profit, cash flow, or existing debt levels prior to this agreement.
Material Changes and Covenants
This filing represents a material change in the company's capital structure through the creation of a new direct financial obligation. Key covenants include:
- Financial Covenant: Borrowers must maintain a fixed charge coverage ratio of not less than 1.10:1.00, calculated on a consolidated basis for the four consecutive fiscal quarters ending.
- Restrictive Covenants: Limitations on incurring additional indebtedness, making investments or loans, incurring liens, consummating mergers, making restricted payments, and entering into affiliate transactions.
- Events of Default: Include nonpayment, covenant violations, incorrect representations, cross-payment defaults exceeding $250,000, bankruptcy, and judgments exceeding $500,000.
Guidance, Outlook, and Risks
The filing does not contain forward-looking guidance, management commentary on future performance, or specific risk factors beyond the standard events of default and covenant restrictions associated with the new credit facility. The agreement is subject to customary notice and cure periods for many events of default.
Investor Verification Checklist
- Verify the company's ability to meet the 1.10:1.00 fixed charge coverage ratio requirement for the fiscal quarter ending December 31, 2018.
- Review the full text of the Credit and Security Agreement (Exhibit 10.1) for specific definitions of "eligible" assets used in the borrowing base calculation.
- Assess the impact of the new debt service obligations on the company's liquidity and cash flow.
- Monitor compliance with restrictive covenants regarding additional indebtedness and restricted payments.