Business Context and Reporting Period
Company: Solaris Oilfield Infrastructure, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 19, 2018
Event: Entry into a new Material Definitive Agreement (Credit Agreement) and termination of the prior Amended Credit Facility.
Key Financial Metrics and Debt Structure
This filing details the restructuring of the company's debt facilities rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- New Term Loan: $50.0 million advancing term loan (Advance Loan).
- New Revolving Loan: $20.0 million revolving credit facility with a $10.0 million uncommitted accordion option.
- Total Facility Size: $70.0 million (excluding accordion option).
- Maturity Date: January 19, 2022.
- Amortization: Advance Loan amortization begins in April 2019.
- Interest Rate: One-month LIBOR plus an applicable margin ranging from 3.00% to 3.50% based on senior leverage ratio.
- Commitment Fee: 0.25% to 0.50% on undrawn revolving amounts.
- Collateral: Secured by a pledge of substantially all assets of the Company and subsidiaries; guaranteed by domestic subsidiaries.
Material Changes Versus Prior Period
The primary material change is the replacement of the Amended Credit Facility (originally dated December 1, 2016, and amended May 17, 2017) with the new Credit Agreement effective January 19, 2018.
- Structure Change: Transitioned from the prior facility to a split structure of a $50.0 million term loan and a $20.0 million revolver.
- Borrowing Base: Revolving loan borrowings are now limited by a borrowing base calculated monthly based on eligible accounts and inventory (inventory capped at 35% of the borrowing base).
- Term Loan Limit: Advance Loan borrowings cannot exceed 80% of the net orderly liquidation value of applicable equipment or facility build-outs.
Covenants, Guidance, and Restrictions
The new Credit Agreement imposes specific financial covenants and capital expenditure limits:
- Indebtedness to EBITDA: Maximum 3.50:1.00, stepping down to 3.25:1.00 (April 1, 2018) and 3.00:1.00 (October 1, 2018).
- Senior Indebtedness to EBITDA: Maximum 2.50:1.00, stepping down to 2.25:1.00 (April 1, 2018) and 2.00:1.00 (October 1, 2018).
- EBITDA to Fixed Charges: Minimum 1.25:1.00.
- Cash Deduction: Indebtedness calculations allow a deduction of the lesser of $10.0 million or 50% of unrestricted cash.
- Capital Expenditures: Limited to $225.0 million for fiscal year 2018 and $75.0 million for fiscal year 2019 and thereafter. Unused 2018 cap may be carried forward starting in 2020.
- Prepayment: Loans may be prepaid at any time without penalty.
Note: The filing does not provide management commentary on future revenue guidance, specific risk factors beyond the covenants, or unusual items.
Investor Verification Checklist
- Verify the company's current leverage ratios to ensure compliance with the stepped-down covenants effective April 1, 2018.
- Confirm the current borrowing base availability under the new inventory and accounts receivable limits.
- Review the company's capital expenditure plans against the $225.0 million limit for fiscal year 2018.
- Assess the impact of the new interest rate margin (3.00% - 3.50% over LIBOR) on future interest expense.
- Check for any subsequent filings regarding the utilization of the $10.0 million accordion option.