Business Context and Reporting Period
Company: Babcock & Wilcox Enterprises, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 30, 2021
Event: Entry into new material definitive debt agreements and termination of a prior credit agreement.
Key Financial Metrics and Debt Structure
This filing details the restructuring of the Company's liquidity facilities rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- New Revolving Credit Facility: Up to $50 million asset-based revolving credit facility (subject to borrowing base calculation).
- Letter of Credit Facility: Up to $110 million in letters of credit, secured in part by cash collateral from an affiliate of MSD Partners.
- Interest Rates (Revolving Credit): Base rate + 2.0% or LIBOR + 3.0%.
- Interest Rates (Reimbursement Agreement): Base rate + 6.50% or LIBOR + 7.50%.
- Guaranty Fee: $935,000 per annum payable to B. Riley Financial, Inc.
- Maturity Date: June 30, 2025 for all new Debt Facilities.
- Collateral: Substantially all assets of the Company and guarantors; Letter of Credit Facility also secured by cash collateral.
Material Changes Versus Prior Period
- Termination of Prior Agreement: The Amended and Restated Credit Agreement dated May 14, 2020 (with Bank of America, N.A.) was paid off and terminated as of June 30, 2021.
- New Lenders and Agents: PNC Bank, National Association, is the administrative agent for the new Revolving Credit and Letter of Credit Agreements. MSD PCOF Partners XLV, LLC, serves as the administrative agent for the Reimbursement Agreement.
- Guaranty Structure: B. Riley Financial, Inc. has provided a guaranty of payment regarding the Company's obligations under the Reimbursement Agreement.
Guidance, Outlook, Risks, and Covenants
Use of Proceeds: Working capital, general corporate purposes, and backstopping letters of credit under the terminated 2020 agreement.
Financial Covenants: The Debt Documents require compliance with:
- Quarterly fixed charge coverage test.
- Quarterly senior net leverage ratio test.
- Non-guarantor cash repatriation covenant.
- Minimum liquidity covenant.
- Annual cap on maintenance capital expenditures.
Prepayment Terms: The Revolving Credit Agreement allows prepayment without penalty. The Reimbursement Agreement includes prepayment fees of 102.25% (Year 1), 102% (Year 2), and 101.25% (Year 3).
Risks: Events of default include failure to make payments, covenant breaches, defaults on other indebtedness, and insolvency. If triggered, all outstanding amounts may become immediately due.
Investor Verification Checklist
- Verify the specific borrowing base calculation limits for the $50 million revolving facility to determine actual availability.
- Confirm the status of the cash collateral provided by MSD Partners securing the $110 million letter of credit facility.
- Review the Company's ability to meet the new quarterly fixed charge coverage and senior net leverage ratio covenants.
- Assess the impact of the $935,000 annual fee to B. Riley and the higher interest spreads on the Reimbursement Agreement compared to the prior facility.
- Examine the intercreditor arrangements referenced in the collateral section to understand priority of claims.