Business Context and Reporting Period
Company: Babcock & Wilcox Enterprises, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: May 14, 2020
Event: Entry into a Material Definitive Agreement (Amended and Restated Credit Agreement) and related equity transactions with B. Riley Financial, Inc.
Key Financial Metrics and Capital Structure
This filing details a refinancing and 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 Commitment: B. Riley committed to provide up to $70.0 million in additional last out term loans.
- Immediate Funding: $30.0 million funded upon execution to pay transaction fees and repay revolving credit facility borrowings.
- Future Funding: At least $35.0 million to be funded in installments (subject to equity offering proceeds) and $5.0 million upon request.
- Revolving Credit Facility: $205.0 million sublimit maintained; maturity extended to June 30, 2022.
- Interest Rates:
- Revolving Credit Facility: LIBOR + 7.0% or Base Rate + 6.0% (reducible by 2.0% if commitments drop below $200.0 million).
- Last Out Term Loans: 12.0% fixed rate.
- Letters of Credit Fee: 4.0%.
- Interest Deferral: Interest payments on revolving credit loans incurred between May 14, 2020, and August 31, 2020, are deferred and payable in six equal installments from January 29, 2021, through June 30, 2021.
- Liquidity Covenant: Minimum required liquidity of $30.0 million (modified to exclude excess cash of non-loan parties).
Material Changes Versus Prior Period
The A&R Credit Agreement significantly alters the terms of the previous Amended Credit Agreement (dated May 11, 2015):
- Maturity Extension: Revolving credit facility maturity extended to June 30, 2022; last out term loans extended to December 30, 2022.
- Covenant Modifications:
- Indebtedness covenant modified to permit up to $10.0 million in governmental assistance for COVID-19 relief.
- Added a $50.0 million basket for third-party letters of credit.
- Removed covenants related to European Völund EPC loss projects.
- Financial covenant testing suspended through September 30, 2020, with a requirement to renegotiate levels by October 31, 2020.
- Commitment Reductions: Revolving facility commitments will automatically decrease to match term loan funding dates (e.g., $10.0 million reduction on November 30, 2020).
- Termination: The backstop commitment letter provided by B. Riley on January 31, 2020, was terminated.
Guidance, Outlook, Risks, and Unusual Items
Equitization Agreement:
- B. Riley will receive shares of common stock in lieu of $12.343 million in interest payments (May 14, 2020 – Dec 31, 2020) and a $3.9 million guaranty fee.
- Total value of equitized payments: $16.243 million.
- Conversion Price: Based on the 15-day VWAP starting May 15, 2020, with a NYSE minimum floor of $1.55 per share.
- Share Cap: Without stockholder approval, no more than 10,479,354 shares will be issued. If the conversion price is below $1.55 and stockholder approval is not obtained, the unpaid amounts will be paid in cash at maturity.
- B. Riley provided a limited guaranty for the revolving credit facility obligations.
- Guaranty is enforceable upon B. Riley's failure to fund term loans, bankruptcy events, or acceleration of borrowings.
- Event of Default: Failure to renegotiate financial covenant levels by October 31, 2020, constitutes an event of default.
- Control: B. Riley affiliates control approximately 17.8% of voting power and have significant influence over management and policies.
- Forward-Looking Risks: Includes impact of COVID-19, asset impairments, ability to service debt, pension contribution waivers, and resolution of European EPC project issues.
Investor Verification Checklist
- Verify the final Conversion Price and the exact number of shares to be issued to B. Riley under the Equitization Agreement.
- Confirm the status of the renegotiation of financial covenant levels by the October 31, 2020 deadline to avoid an event of default.
- Monitor the funding schedule of the remaining $40.0 million in term loans and the corresponding automatic reductions in revolving credit facility commitments.
- Assess the impact of the 12.0% interest rate on last out term loans and the 7.0% margin on the revolving facility on future interest expense.
- Review the Company's ability to obtain necessary stockholder approval for the issuance of shares if the conversion price falls below $1.55.