Business Context and Reporting Period
Company: Builders FirstSource, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: December 14, 2017
Event: Redemption of outstanding Senior Notes.
Key Financial Metrics and Transaction Details
- Debt Instrument: 10.75% Senior Notes due 2023.
- Principal Amount: $367.6 million aggregate principal amount.
- Redemption Date: December 29, 2017.
- Redemption Price: 100% of principal plus an Applicable Premium and accrued interest.
- Funding Source: Combination of cash generated from operations and borrowings on the revolving credit facility.
Material Changes and Drivers
The Company elected to redeem the Notes in contemplation of pending tax reform, which may limit the future deductibility of interest expense. This action represents a material change in the Company's capital structure and debt obligations.
Management Commentary and Financial Impact
Management noted that a certain amount of 2018 interest will be paid in 2017 as a result of this transaction. This payment may marginally impact the cash flow and leverage ratio the Company expected to achieve as of December 31, 2017. The Applicable Premium is calculated based on the present value of the redemption price at August 15, 2018, and required interest payments, discounted at the applicable treasury rate plus 50 basis points.
Investor Verification Checklist
- Verify the exact calculation of the Applicable Premium based on the treasury rate on the Redemption Date.
- Confirm the impact of the early interest payment on the Company's year-end 2017 leverage ratio.
- Assess the availability of liquidity on the revolving credit facility to fund the redemption.
- Review the specific provisions of the pending tax reform affecting interest deductibility.