Business Context and Reporting Period
SunCoke Energy, Inc. filed a Form 8-K on May 24, 2017, reporting the entry into a material definitive agreement. The company, incorporated in Delaware, is based in Lisle, Illinois.
Key Financial Metrics and Debt Structure
The filing details a new $100 million secured credit facility with Bank of America, N.A., as administrative agent. Key terms include:
- Facility Size: $100 million revolving credit facility.
- Letters of Credit: Up to $50 million sublimit.
- Maturity Date: May 24, 2022.
- Interest Rates:
- Adjusted Eurodollar Rate (LIBOR) plus a margin of 1.75% to 2.25%.
- Alternate Base Rate plus a margin of 0.75% to 1.25%.
- Fees:
- Letter of credit fees: 1.75% to 2.25%.
- Fronting fee: 0.25% per annum.
- Commitment fee on unused commitments: 0.40% per annum.
- Collateral: Secured by liens on substantially all real and personal property assets of the Borrower and guarantors.
Material Changes and Covenants
The new agreement amends and restates the existing credit agreement dated July 26, 2011. The filing introduces specific financial covenants effective for the fiscal quarter ending June 30, 2017, and continuing thereafter:
- Maximum Leverage Ratio: Consolidated total funded debt to EBITDA must not exceed 3.25 to 1.0.
- Minimum Interest Coverage: EBITDA to interest expense must not be less than 2.75 to 1.0.
The agreement also imposes restrictions on incurring additional indebtedness, making distributions, selling assets, and entering into affiliate transactions. Mandatory prepayments are required for certain asset sales, events of loss, or unauthorized indebtedness.
Outlook and Use of Proceeds
Management intends to use the proceeds from the Credit Facility for:
- Capital expenditures.
- Acquisitions.
- Working capital needs.
- Making distributions.
- Repayment of other indebtedness.
- General corporate purposes.
The facility allows for up to $50 million in incremental revolving or term loans subject to lender commitments. The filing does not provide specific revenue, profit, or cash flow figures for the current period.
Investor Verification Checklist
- Verify the company's current consolidated total leverage ratio to ensure compliance with the 3.25:1.0 covenant.
- Confirm the EBITDA to interest expense ratio meets the minimum 2.75:1.0 requirement.
- Review the specific terms of the "events of default" and mandatory prepayment triggers in the full Credit Agreement (Exhibit 10.1).
- Assess the impact of the new interest rate margins and fees on future interest expense compared to the prior 2011 agreement.
- Monitor any planned distributions or debt repayments that may utilize the new facility proceeds.