Business Context and Reporting Period
Company: TEAM, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: September 11, 2025
Event: Entry into a Material Definitive Agreement and related debt amendments to restructure capital and reduce leverage.
Key Financial Metrics and Transaction Details
Capital Raised: $75.0 million total consideration from InspectionTech Holdings LP (Stellex Holder).
Securities Issued:
- 75,000 shares of Series B Preferred Stock ($1,000 stated value per share).
- Warrants to purchase 982,371 shares of Common Stock (Tranche A) at $23.00/share.
- Warrants to purchase 470,889 shares of Common Stock (Tranche B) at $50.00/share.
- $25.0 million to repay loans under the ABL Credit Agreement.
- Approximately $42.9 million to repay loans under the Second Lien Term Loan Agreement.
- Remaining proceeds used for transaction expenses.
- ABL Credit Agreement: Maturity extended to October 2, 2028; commitments increased from $130.0 million to $150.0 million; interest rate margin reduced by 0.25% to 0.375%.
- First Lien Term Loan: Interest rate margin reduced by 0.25%; maximum Net Leverage Ratio increased to 6.00:1.00 through Q4 2026.
- Second Lien Term Loan: Maximum Net Leverage Ratio increased to 6.50:1.00 through Q4 2026.
- Annual return rate of 10.5% (compounded quarterly if unpaid).
- Redeemable by Company after March 11, 2029; mandatory redemption by holders after December 31, 2030.
- Redemption price is the greater of 140% of stated value (for first 42 months) or accreted value.
- Company may draw up to $30.0 million prior to September 11, 2027, in minimum increments of $5.0 million.
- Subject to a First Lien Net Leverage Ratio of 6.50:1.00.
- Undrawn commitment fee of 1.0% per annum.
Material Changes Versus Prior Period
This filing represents a significant change in the Company's capital structure and debt covenants compared to the prior period:
- Leverage Capacity: The Company has secured higher leverage ratios (up to 6.50:1.00) to accommodate the new capital structure and provide operational flexibility.
- Debt Maturity: The ABL facility maturity has been extended by approximately one year.
- Cost of Capital: Interest rate margins on both the ABL and First Lien Term Loan have been reduced.
- Equity Structure: Introduction of a new class of preferred stock with a 10.5% return and significant warrant issuance, diluting existing common shareholders upon exercise.
- Board Composition: Stellex is entitled to appoint two independent directors to the Board.
Guidance, Outlook, Risks, and Contingencies
Management Commentary and Use of Funds:
- Proceeds from the Delayed Draw (if utilized) are designated for permitted acquisitions, growth initiatives, repayment of First Lien Term Loans, and up to 20% for a transformation plan agreed upon with Stellex.
- The transaction is intended to strengthen the balance sheet and provide liquidity for strategic initiatives.
- Dividend Restrictions: The Company is restricted from paying cash dividends on capital stock ranking junior to the Series B Preferred (including Common Stock) while Stellex holds Warrants.
- Shareholder Approval: If the Company fails to obtain shareholder approval for the Warrant Shares following the 2026 Annual Meeting, the Series B Preferred return rate increases by 1% per annum.
- Redemption Risk: If the Company fails to redeem the Series B Preferred on or after December 31, 2030, the return rate increases by 1.75% per annum annually, capped at 15%.
- Covenant Compliance: Future draws on the Delayed Draw are contingent on maintaining a First Lien Net Leverage Ratio of 6.50:1.00.
- Voting Support: Corre Holders (owning ~35% of voting power) have entered a Voting and Support Agreement to vote in favor of the transactions and against actions impeding them until September 30, 2026.
Investor Verification Checklist
- Verify the exact terms of the "transformation plan" mentioned as a potential use of Delayed Draw proceeds.
- Confirm the timeline for the shareholder vote required to approve the issuance of Warrant Shares.
- Review the specific covenants in the Certificate of Designation regarding restrictions on future indebtedness and equity issuances.
- Monitor the Company's ability to maintain the 6.50:1.00 First Lien Net Leverage Ratio to access the $30.0 million Delayed Draw.
- Assess the impact of the 10.5% preferred return and potential rate increases on future cash flow and earnings per share.