Business Context and Reporting Period
Company: CECO Environmental Corp.
Filing Type: Form 8-K (Current Report)
Date of Report: June 11, 2019
Event: Entry into a Second Amended and Restated Credit Agreement.
Key Financial Metrics and Debt Structure
This filing details the restructuring of the Company's senior credit facilities rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
| Facility Type | Amount | Maturity Date |
|---|---|---|
| Revolving Credit Facility | $140.0 million | June 11, 2024 |
| Term Loan | $50.0 million | June 11, 2024 |
| Total Credit Facilities | $190.0 million | June 11, 2024 |
Interest Rates:
- Base Rate Loans: Applicable margin of 0.75% to 1.75% plus the highest of Prime, Fed Funds + 0.50%, Eurocurrency + 1.00%, or 1.00%.
- Eurocurrency Rate Loans: Applicable margin of 1.75% to 2.75% plus LIBOR (or comparable rate).
Material Changes and Covenants
The New Credit Agreement amends the existing agreement dated September 3, 2015. Key changes include:
- Increased Capacity: The Company may increase the Credit Facilities by up to $75.0 million plus an additional amount, provided the Consolidated Net Leverage Ratio does not exceed 3.0 to 1.0.
- Financial Covenants (Consolidated Net Leverage Ratio):
- Period ending June 30, 2019 through September 30, 2020: Maximum 3.75 to 1.00.
- Period ending December 31, 2020 through September 30, 2021: Maximum 3.50 to 1.00.
- Period thereafter: Maximum 3.25 to 1.00.
- Note: The ratio may be increased by 0.50 to 1.00 (max 4.00 to 1.00) for three fiscal quarters following a Permitted Acquisition of $15.0 million or more.
- Fixed Charge Coverage Ratio: Must maintain a ratio of not less than 1.25 to 1.00 as of the most recently completed fiscal quarter.
Outlook, Risks, and Management Commentary
Management Commentary: The filing states that the agreement contains covenants and representations usual and customary for transactions of this type. It does not provide specific forward-looking guidance on revenue or earnings.
Risks and Contingencies:
- The Company is subject to customary events of default under the New Credit Agreement.
- Interest rates are variable and dependent on the Company's Consolidated Net Leverage Ratio and market benchmarks (Prime, LIBOR, etc.).
- Certain lenders and their affiliates provide other financial services to the Company for which they receive fees.
Important Facts for Investor Verification
- Verify the Company's current Consolidated Net Leverage Ratio to ensure compliance with the 3.75 to 1.00 covenant threshold effective immediately.
- Confirm the Company's ability to maintain a Consolidated Fixed Charge Coverage Ratio of at least 1.25 to 1.00.
- Review the full text of the Second Amended and Restated Credit Agreement (Exhibit 10.1) for specific definitions of "Permitted Acquisition" and "Consolidated Net Leverage Ratio."
- Monitor the Company's liquidity position given the maturity date of June 11, 2024, for the entire $190.0 million facility.