Business Context and Reporting Period
This Form 8-K was filed by Southwest Gas Holdings, Inc. on November 7, 2017. The report details a material definitive agreement regarding debt financing and the completion of a strategic acquisition by the Company's construction services subsidiaries.
Key Financial Metrics and Agreements
- Debt Facility: Amended and restated senior secured revolving credit and term loan facility increased from $300 million to $450 million.
- Acquisition Cost: Completed acquisition of New England Utility Constructors, Inc. for approximately $95 million, less assumed debt.
- Interest Rates: LIBOR/CDOR plus a margin of 1.00% to 2.25%; Alternate base rate plus a margin of 0.00% to 1.25%.
- Commitment Fee: Ranges from 0.15% to 0.35% per annum on the unfunded portion.
- Facility Maturity: The new facility is scheduled to expire in November 2022.
Material Changes
The Company significantly expanded its borrowing capacity by $150 million to support growth initiatives. Concurrently, the Company executed the acquisition of New England Utility Constructors, Inc., extending its construction services operations into the Northeast United States. The previous credit facility, set to expire in October 2019, was replaced by this new agreement.
Outlook, Risks, and Unusual Items
Management Commentary: The acquisition is expected to provide additional opportunities for expansion. Funding was primarily provided by the new $450 million credit facility. A detailed valuation analysis of the acquired assets is underway and expected to be completed in the fourth quarter of 2017, with a substantial majority of the purchase price anticipated to be allocated to goodwill and intangibles.
Risks and Contingencies: Forward-looking statements are subject to risks including the acquired company's failure to meet financial expectations, regulatory changes in the energy construction industry, economic downturns, and the inability to retain key personnel. Additional payments for excess net working capital and taxes related to a Section 338(h)(10) election are required and will be adjusted in the first half of 2018.
Investor Verification Checklist
- Verify the final allocation of the $95 million purchase price between goodwill, intangibles, and tangible assets once the valuation analysis is complete.
- Monitor the adjustment of working capital and tax payments related to the acquisition in the first half of 2018.
- Review the consolidated leverage ratio to determine the specific applicable interest margin and commitment fee rates.
- Assess the integration progress of New England Utility Constructors, Inc. into Centuri's operations.