Business Context and Reporting Period
Company: Broadwind Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 23, 2012
Event: Entry into a Material Definitive Agreement (Loan and Security Agreement).
Key Financial Metrics and Debt Structure
This filing details a new financing arrangement rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- New Credit Facility: $20,000,000 secured revolving credit facility with AloStar Bank of Commerce.
- Term: Three years (ending August 23, 2015).
- Borrowing Base: Approximately 85% of eligible receivables and 50% of eligible inventory book value.
- Interest Rate: One-month LIBOR + 4.25% margin (minimum 5.25% per annum).
- Fees: 0.50% per annum on unused portion; quarterly minimum interest payment of $60,000.
- Letters of Credit Sublimit: $1,000,000.
- Collateral: First priority security interest in accounts, inventory, cash, equipment, and subsidiary equity.
Material Changes and Debt Refinancing
The Company is utilizing the new facility to refinance existing obligations and fund general corporate needs. Proceeds will be used to repay:
- Wells Fargo Bank: Outstanding obligations under an existing aggregate $10,000,000 credit facility (Account Purchase Agreements).
- Investors Community Bank: Three notes payable totaling $931,703.
- J. Cameron Drecoll: Promissory Note in the original principal amount of $1,453,425.64.
- Transaction Costs: Fees and expenses associated with the repayment of the above debts and the new facility.
Covenants, Risks, and Management Commentary
Covenants: The agreement requires the Company to maintain a minimum monthly fixed charge coverage ratio and minimum monthly EBITDA. Restrictive covenants limit the ability to incur additional indebtedness, create liens, merge, dispose of assets, pay dividends, or undergo a change of control without consent.
Events of Default: Includes non-payment, covenant breaches, material judgments, bankruptcy, insolvency, and change of control. Default may result in the acceleration of all obligations.
Prepayment: Allowed in whole or in part without penalty, subject to customary "breakage" costs for LIBOR loans.
Early Termination: If terminated prior to August 23, 2015, a fee of up to 3% of the Credit Facility limit may apply.
Investor Verification Checklist
- Verify the Company's ability to meet the new minimum monthly fixed charge coverage ratio and EBITDA requirements.
- Confirm the status of the repayment of the Wells Fargo, Investors Community Bank, and J. Cameron Drecoll obligations.
- Review the attached Loan and Security Agreement (Exhibit 10.1) for specific definitions of "eligible receivables" and "eligible inventory" which determine the borrowing base.
- Assess the impact of the 0.50% unused facility fee on cash flow if the full $20 million is not drawn.
- Monitor for any potential early termination fees if the Company seeks to refinance before 2015.