Business Context and Reporting Period
Company: Babcock & Wilcox Enterprises, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 18, 2024 (Event Date); January 22, 2024 (Signature Date)
Primary Event: Entry into a Material Definitive Agreement (Credit Agreement) with Axos Bank.
Key Financial Metrics and Facility Details
This filing details a new financing arrangement rather than reporting period-end financial results (revenue, profit, or cash flow). Key metrics related to the new facility include:
- Facility Size: Up to $150 million asset-based revolving credit facility.
- Letter of Credit Sublimit: $100 million.
- Interest Rates (SOFR Loans): SOFR + 5.25% (if principal ≤ $100 million) or SOFR + 4.00% (if principal ≥ $100 million).
- Origination Fee: $1,500,000.
- Commitment Fee: 0.50% per annum on unused commitments.
- Collateral Monitoring Fee: $1,000 per month.
- B. Riley Guaranty Fee: Annual fee of 2.00% of Aggregate Revolving Commitments (approx. $3 million).
Material Changes and Use of Proceeds
The Company entered into a new Credit Agreement to replace its existing revolving credit facility with PNC Bank. The proceeds and letter of credit availability will be used to:
- Pay off the current revolving credit facility with PNC Bank.
- Provide for working capital needs.
- Provide cash collateral for letters of credit.
- Fund general corporate purposes.
Security: Obligations are secured by substantially all assets of the Company and guarantors, subject to intercreditor arrangements.
Outlook, Covenants, and Risks
Maturity Date: January 18, 2027, unless the Company's senior notes due 2026 are not refinanced by August 30, 2025, in which case the maturity accelerates to August 30, 2025.
Financial Covenants: The agreement requires compliance with:
- Quarterly fixed charge coverage test.
- Quarterly total net leverage ratio test.
- Cash repatriation covenant.
- Minimum liquidity covenant.
- Annual cap on maintenance capital expenditures.
- Limit on unrestricted cash.
Risks and Contingencies:
- Events of Default: Include failure to make payments, covenant breaches, defaults on other indebtedness, and insolvency. Default allows the agent to declare all obligations immediately due.
- B. Riley Guaranty: B. Riley Financial, Inc. has provided a guaranty of payment. If called upon, the Company must reimburse B. Riley and execute a junior secured promissory note within 60 days.
- Prepayment: Permitted subject to an early termination fee.
Investor Verification Checklist
- Verify the exact payoff amount of the existing PNC Bank facility to assess immediate cash outflow.
- Confirm the Company's current leverage ratio and fixed charge coverage to ensure compliance with the new covenants.
- Review the status of the 8.125% and 6.50% Senior Notes due 2026 to determine if the maturity date will be extended to 2027 or shortened to August 2025.
- Assess the impact of the $3 million annual fee to B. Riley on future operating expenses.
- Examine the "borrowing base calculation" limitations to understand the actual available liquidity versus the $150 million commitment.