Shimmick Corp current report, 20 May 2024

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Shimmick Corporation — Form 8-K Summary

Business Context and Reporting Date

Shimmick Corporation filed a Form 8-K dated May 20, 2024, reporting a financing and restructuring transaction involving AECOM and Berkshire Hathaway Specialty Insurance Company. The filing concerns corporate actions and financing arrangements rather than quarterly or annual operating results.

Key Financial and Capital Structure Matters

  • New revolving credit facility: The company and its subsidiaries entered into a secured revolving credit facility with borrowing capacity of up to $60 million, maturing May 20, 2029.
  • Interest rate: One-month Term SOFR, subject to a 1.00% floor, plus 3.50%. Interest may be paid in cash or in kind at the company’s election.
  • Security and covenants: The facility is guaranteed by Shimmick Corporation and secured by substantially all assets of the company and its borrowers. A maximum leverage ratio covenant begins testing in the third quarter of fiscal 2025.
  • MidCap facility amendment: The existing MidCap facility’s maturity was accelerated from March 27, 2028 to September 30, 2024. The amendment changes pricing to adjusted Term SOFR, subject to a 1.00% floor, plus 5.50%, and replaces the leverage covenant with a minimum liquidity test.
  • MidCap borrowing base: The amendment provides for scheduled reductions in the borrowing base and reduces commitments corresponding to prepayments.
  • Equity issuance: Shimmick issued 5,144,622 common shares to AECOM on May 20, 2024, representing approximately 19.99% of shares outstanding immediately before issuance. The company agreed to issue an additional 2,600,378 shares, subject to stockholder approval.
  • Total contemplated issuance: The Share Issuance Agreement covers 7,745,000 shares. AECOM receives registration rights, including potential underwritten offerings and customary piggyback rights.
  • Liquidity and cash flow: The filing does not provide cash balances, operating cash flow, free cash flow, liquidity headroom, revenue, profit, margins, or other operating-performance metrics. Proceeds from the new facility are expected to be used for general corporate purposes.

Material Changes Versus Prior Arrangements

  • The new $60 million secured revolving credit facility replaced the BHSI Financing Agreement, and all obligations, security interests, and liens under that agreement were released or terminated.
  • The MidCap facility was amended to waive all existing defaults, add AECOM as an additional guarantor, shorten its maturity, modify pricing, reduce borrowing capacity over time, and introduce a minimum liquidity test.
  • AECOM received a substantial equity position through the initial share issuance and may receive additional shares following stockholder approval.
  • The board expanded from six to seven members and appointed Peter Kravitz as an independent director and member of a newly established Special Committee.

Management Actions, Contingencies, and Unusual Items

  • A Special Committee of independent directors will oversee specified matters, including the budget and use of credit-facility funds, material or non-ordinary-course asset sales, other transactions, and certain compensation matters.
  • The company is required to appoint a chief transformation officer under the related side letter.
  • Shimmick and AECOM entered into a settlement and mutual release covering specified claims relating to the Golden Gate Bridge Project, Gerald Desmond Bridge Project, certain earn-out claims, and the Chickamauga Lock Project.
  • AECOM agreed to jointly seek dismissal with prejudice of pending Delaware Chancery Court litigation, AECOM v. SCCI National Holdings, Inc., et al.
  • The additional 2,600,378 shares remain contingent on approval by Shimmick stockholders under Nasdaq listing requirements. The company intends to hold a special meeting as soon as practical.
  • The filing identifies customary affirmative and negative covenants and events of default but does not provide the full economic effect of all baskets, exceptions, or covenant calculations in the filing text.

Investor Verification Priorities

  1. Verify actual borrowings, availability, interest paid in cash versus in kind, and remaining liquidity under both credit facilities.
  2. Review the MidCap borrowing-base reduction schedule and the September 30, 2024 maturity.
  3. Confirm stockholder approval and issuance status of the additional 2,600,378 AECOM shares, including resulting dilution.
  4. Review the full Credit Agreement for leverage-ratio definitions, collateral coverage, mandatory prepayments, and events of default.
  5. Assess whether the company can satisfy the MidCap minimum liquidity test and the new leverage covenant beginning in fiscal 2025.
  6. Review the settlement agreement and dismissal filings to confirm the scope of released claims and any remaining litigation exposure.
  7. Determine the financial impact of the transactions, as the Form 8-K does not quantify fees, debt balances, fair values, gains or losses, or effects on future earnings.