Business Context and Reporting Period
Skyward Specialty Insurance Group, Inc. (SKWD), a Delaware corporation and emerging growth company, filed this Form 8-K on April 3, 2023, reporting events occurring on March 29, 2023. The filing details the entry into a new material definitive credit agreement and the termination of a prior credit facility.
Key Financial Metrics and Debt Structure
The filing focuses on the establishment of a new unsecured revolving credit facility rather than reporting period-end financial performance metrics such as revenue or profit.
- Facility Size: Initial maximum principal amount of $150.0 million.
- Letters of Credit: Up to $30.0 million of the facility may be utilized for letters of credit.
- Accordion Feature: Capacity may be increased by up to $50.0 million at the option of existing and new lenders.
- Interest Rates: Term SOFR plus 150-190 basis points or Base Rate plus 50-90 basis points, dependent on the debt-to-capitalization ratio.
- Fees: Commitment fee of 0.20% to 0.35% on average daily undrawn amounts.
- Maturity: The availability period terminates on March 29, 2028.
- Guarantees: Obligations are guaranteed by the Company's non-insurance company subsidiaries.
Material Changes Versus Prior Period
The Company terminated its prior Credit Agreement dated December 11, 2019, with Prosperity Bank. In connection with this termination, the Company fully repaid all outstanding amounts under the prior agreement. This action was taken simultaneously with the execution of the new facility with Truist Bank as the administrative agent.
Guidance, Covenants, and Risks
The new facility includes customary covenants and financial restrictions:
- Debt Incurrence: Limitations on incurring additional indebtedness exceeding $10.0 million.
- Shareholder Distributions: Restrictions on distributions, redemptions, repurchases, or retirements of stock upon the occurrence of certain events.
- Financial Covenants: Requirements for minimum consolidated net worth, maximum total debt to capitalization, minimum A.M. Best rating, and minimum liquidity.
- Events of Default: Standard events of default apply.
The filing does not provide specific forward-looking guidance on revenue or earnings, nor does it disclose specific values for the financial covenants (e.g., the exact minimum net worth threshold).
Key Facts for Investor Verification
- Verify the Company's current debt-to-capitalization ratio to determine the applicable interest rate margin and commitment fee.
- Confirm the Company's current A.M. Best rating to ensure compliance with the new facility's minimum rating covenant.
- Review the specific thresholds for the minimum consolidated net worth and liquidity covenants in the full text of the Credit Agreement (Exhibit 10.1).
- Monitor the Company's ability to maintain the $10.0 million limit on additional indebtedness outside of this facility.