Business Context and Reporting Period
Company: Mueller Water Products, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 18, 2009
Event: Entry into a Material Definitive Agreement (Amendment No. 2 to the Amended and Restated Credit Agreement).
Key Financial Metrics and Debt Structure
The filing details a restructuring of the company's credit facility. Key figures include:
- Revolving Credit Facility: Reduced to an aggregate principal amount of $200.0 million.
- Term Loan A Outstanding Principal: $120.4 million (after prepayment).
- Term Loan B Outstanding Principal: $445.3 million (after prepayment).
- Prepayment Amount: $100.0 million aggregate principal prepaid upon closing.
- Second Lien Facility: New allowance for up to $250.0 million.
- Eliminated Facilities: Swing line loan facility, receivables financing facility, and options to increase term loan borrowing capacity.
Note: The filing does not provide current revenue, profit, cash flow, or liquidity metrics beyond the debt restructuring details.
Material Changes Versus Prior Period
Amendment No. 2 introduces significant changes to the credit agreement dated May 24, 2007:
- Debt Reduction: Immediate prepayment of $100.0 million in term loans.
- Covenant Tightening: Introduction of new leverage and coverage ratios with specific thresholds for fiscal quarters ending through 2013.
- Capital Expenditure Limits: New covenant limiting consolidated capital expenditures to $25.0 million for the two quarters ending September 30, 2009.
- Mandatory Prepayments: Increased requirements triggered by asset sales, equity sales, debt issuance, and excess cash flow based on leverage ratios.
- Restricted Payments: Further restrictions on restricted payments and acquisitions.
Guidance, Outlook, and Risks
Covenant Requirements: The company must adhere to the following financial covenants:
- Consolidated Leverage Ratio: Maximum ratio of 6.50 to 1.00 for the quarter ending June 30, 2009, peaking at 9.50 to 1.00 for the quarter ending December 31, 2009, before declining to 4.00 to 1.00 by September 30, 2012.
- Consolidated Interest Charge Coverage Ratio: Minimum ratio of 1.50 to 1.00 for the quarter ending June 30, 2009, dipping to 1.25 to 1.00 for the period September 30, 2009 through March 31, 2010, and rising to 3.00 to 1.00 by September 30, 2013.
- Consolidated Senior Secured First Lien Leverage Ratio: New covenant with a maximum of 3.75 to 1.00 for June 30, 2009, peaking at 5.25 to 1.00 for the period December 31, 2009 through March 31, 2010.
Interest Rates and Fees: Interest rates are based on LIBOR or Base Rate plus an Applicable Margin. The margin ranges from 4.00% to 5.00% for Base Rate loans and 5.00% to 6.00% for Eurocurrency loans, depending on the Consolidated Senior Secured First Lien Leverage Ratio. An amendment fee of 0.500% of outstanding borrowings and commitments was paid to approving lenders.
Investor Verification Checklist
- Verify the company's ability to meet the immediate Consolidated Leverage Ratio of 6.50 to 1.00 for the quarter ending June 30, 2009.
- Confirm the impact of the $25.0 million capital expenditure cap on operations for the remainder of fiscal 2009.
- Assess the risk of mandatory prepayments triggered by asset sales or excess cash flow under the new leverage-based thresholds.
- Review the attached Exhibit 10.1.2 for the full legal text of Amendment No. 2.
- Monitor future filings for compliance with the new Senior Secured First Lien Leverage Ratio covenant.