Business Context and Reporting Period
Company: DNOW Inc. (formerly NOW Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: December 18, 2015
Reporting Period: Fiscal quarter ending December 31, 2015
Key Financial Metrics
This filing does not provide specific numerical values for revenue, profit, cash flow, margins, or total debt. The report focuses exclusively on a covenant compliance issue regarding the Company's Credit Agreement dated April 18, 2014.
Material Changes and Events
- Potential Default: As of the quarter ending December 31, 2015, the Company may be unable to comply with the interest coverage ratio covenant in its Credit Agreement.
- Waiver Obtained: On December 18, 2015, the Company entered into a waiver with its lenders. This waiver temporarily waives the potential default until January 31, 2016, and permits continued borrowing under the Credit Agreement.
- Proposed Amendment: The Company has commenced discussions to amend the Credit Agreement. The proposed amendment would replace the interest coverage ratio covenant with an asset-based coverage test and require security interests in certain Company assets.
Outlook, Risks, and Management Commentary
- Uncertainty of Amendment: There can be no assurance that the proposed Amendment will be entered into on or before January 31, 2016, or at all.
- Liquidity Risk: If the Amendment is not finalized by the waiver expiration date, the Company may face a default under the Credit Agreement, potentially restricting access to credit facilities.
Investor Verification Checklist
- Verify the status of negotiations for the Credit Agreement Amendment as of January 31, 2016.
- Confirm whether the Company has secured the necessary security interests in assets required for the proposed amendment.
- Monitor subsequent filings for any declaration of default if the waiver expires without a new agreement.
- Review the full text of the Limited Waiver Credit Agreement (Exhibit 10.1) for specific terms of the temporary relief.