Business Context and Reporting Period
Company: Cactus, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 21, 2018
Event: Entry into a new Material Definitive Agreement (Senior Secured Asset-Based Revolving Credit Facility) and termination of the prior credit agreement.
Key Financial Metrics and Debt Structure
This filing details a refinancing of the company's debt structure rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- New Facility (ABL Credit Facility): $75.0 million in revolving commitments.
- Letters of Credit Sublimit: Up to $15.0 million.
- Maturity Date: August 20, 2023.
- Expansion Option: Borrower may request additional commitments up to $50.0 million (total potential capacity of $125.0 million).
- Interest Rates:
- Alternate Base Rate (ABR): Applicable margin of 0.50% to 1.00% per annum.
- Eurodollar (Adjusted LIBO): Applicable margin of 1.50% to 2.00% per annum.
- Commitment Fee: 0.250% to 0.375% per annum on the unused portion.
- Collateral: Secured by liens on assets, excluding equipment, intellectual property, and real estate.
Material Changes Versus Prior Period
The company replaced its Prior Credit Agreement (dated July 31, 2014) with the new ABL Credit Facility.
- Structure Change: The Prior Agreement included a $275.0 million term loan (repaid in full in February 2018 using IPO proceeds) and a $50.0 million revolving facility. The new facility is a pure revolving asset-based facility with a higher initial commitment ($75.0 million vs. $50.0 million).
- Cost Reduction: Interest margins were significantly reduced. The Prior Agreement margins ranged from 2.75% to 3.75% (Eurodollar) and 1.75% to 2.75% (Base Rate). The new facility margins range from 1.50% to 2.00% (Eurodollar) and 0.50% to 1.00% (Base Rate).
- Termination: The Prior Credit Agreement was terminated concurrently with the new agreement. No loans or letters of credit were outstanding under the Prior Agreement at the time of termination.
Guidance, Risks, and Covenants
Covenants: The new facility includes restrictive covenants limiting the ability to incur additional indebtedness, create liens, make investments, sell assets, make restricted payments, or engage in affiliate transactions.
Financial Maintenance Covenant: The company must maintain a fixed charge coverage ratio of 1.0 to 1.0 (EBITDA minus Unfinanced Capital Expenditures to Fixed Charges) during certain periods, specifically when availability under the facility falls below certain levels.
Risks: Failure to perform obligations could result in termination of commitments, immediate acceleration of outstanding borrowings, and foreclosure actions against collateral.
Investor Verification Checklist
- Verify the current "borrowing base" calculation to determine actual available liquidity versus the $75.0 million commitment.
- Review the specific definition of "Unfinanced Capital Expenditures" to assess the impact on the fixed charge coverage ratio covenant.
- Confirm the status of the $50.0 million expansion option and any conditions required to exercise it.
- Examine the full text of Exhibit 10.1 (Credit Agreement) for detailed definitions of "Fixed Charges" and "EBITDA."