Global Power Equipment Group Inc. (OTCMKTS:GLPW) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive
Agreement.
On June16, 2017 (the Closing Date), Global Power
Equipment Group Inc. (the Company) entered into a new
senior secured credit agreement (the New Credit
Agreement) providing for term loan borrowings in an
aggregate principal amount of up to $45 million with an affiliate
of Centre Lane Partners, LLC (Centre Lane) as
Administrative Agent and Collateral Agent, and the other lenders
from time to time party thereto (collectively, the
Lenders).
The New Credit Agreement was entered into between the Company and
Centre Lane following the conclusion of a multi-month formal
refinancing process conducted on the Companys behalf by a
financial advisor.
Maturity
The New Credit Agreement will mature on December16, 2021.
Interest Rate
Borrowings under the New Credit Agreement initially bear interest
at the London Interbank Offered Rate (LIBOR) plus the
sum of 9% per year, payable in cash, and 10% per year, payable
in-kind (PIK) interest. Cash interest is payable
monthly, and the PIK interest accrues to the principal balance on
a monthly basis. Starting on January1, 2018, the PIK interest
rate will increase to 15% per year; however, the PIK interest
rate may be reduced to 10% per year in certain circumstances
where the Company makes a significant debt prepayment.
Security; Guarantees
The Companys obligations under the New Credit Agreement are
guaranteed by all of the Companys wholly-owned domestic
subsidiaries, subject to customary exceptions. The Companys
obligations are secured by first priority security interests on
substantially all of the Companys assets and those of its
wholly-owned domestic subsidiaries. This includes 50% of the
voting equity interests of the Companys domestic subsidiaries and
certain specified foreign subsidiaries and 65% of the voting
equity interests of other directly owned foreign subsidiaries,
subject to customary exceptions.
Optional Prepayment
The Company may voluntarily prepay the term loans at any time or
from time to time, in whole or in part, in a minimum amount of $1
million of the outstanding principal amount, plus any accrued but
unpaid interest on the aggregate amount of the term loans being
prepaid, plus a prepayment premium, to be calculated as follows
(thePrepayment Premium):
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Period |
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PrepaymentPremiumasa PercentageofAggregate |
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On or prior to first anniversary of Closing Date |
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% |
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After first anniversary of Closing Date and on or prior to |
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% |
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After second anniversary of Closing Date and on or prior to |
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% |
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After third anniversary of Closing Date |
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% |
Mandatory Prepayment
Subject to certain exceptions, the Company must prepay an
aggregate principal amount equal to 50% of the Companys Excess
Cash Flow (as defined in the New Credit Agreement), minus the sum
of all voluntary prepayments, within five business days after the
date that is 90 days following the end of each fiscal year. The
New Credit Agreement also requires mandatory prepayment of
certain amounts in the event the Company or its subsidiaries
receives proceeds from certain events and activities, including,
among others, asset sales, casualty events, the issuance of
indebtedness and equity interests not otherwise permitted under
the New Credit Agreement, and the receipt of tax refunds or
extraordinary receipts in excess of $500,000, plus, in certain
instances, the applicable Prepayment Premium, calculated as set
forth above.
Fees
The Company must pay an annual administration fee of $25,000
and an upfront fee equal to 7% of the aggregate commitments
provided under the New Credit Agreement, which bears interest
at a rate of LIBOR plus 19% annual PIK interest. The upfront
fee is payable upon the earlier of maturity or the occurrence
of certain events, including significant debt prepayments or
asset sales that may occur prior to maturity.
Representations, Warranties, and Restrictive Covenants
The New Credit Agreement contains customary representations and
warranties, as well as customary affirmative and negative
covenants. The New Credit Agreement contains covenants that
may, among other things, limit the Companys ability to incur
additional debt, incur liens, make investments, declare or pay
dividends, engage in mergers, acquisitions, and dispositions,
engage in new lines of business or certain transactions with
affiliates, and change accounting policies or fiscal year.
The New Credit Agreement also requires the Company to regularly
provide financial information to the Lenders; however, the
Company is not required to give the Lenders the final audited
consolidated balance sheet and related statements of income,
shareholders equity, and cash flows for the year ended
December31, 2016 until August31, 2017. The Company must also
maintain certain total leverage ratios, fixed charge coverage
ratios, and minimum levels of liquidity, and its capital
expenditures are limited.
Events of Default
Events of default under the New Credit Agreement include, but
are not limited to, a breach of any financial covenant or any
representations or warranties, failure to timely pay any
amounts due and owing, the commencement of any bankruptcy or
other insolvency proceeding, judgments in excess of certain
acceptable amounts, the occurrence of a change in control,
certain events related to ERISA matters, and impairment of
security interests in collateral or invalidity of guarantees or
security documents.
If an event of default occurs, the Lenders may, among other
things, declare all borrowings to be immediately due and
payable, together with accrued interest and fees, and exercise
remedies under the collateral documents relating to the New
Credit Agreement.
Use of Proceeds
The Company used part of the proceeds under the New Credit
Agreement to repay in full all outstanding loans and
obligations under the Companys Credit Agreement, dated
February21, 2012, with Wells Fargo Bank, National Associate, as
Administrative Agent, U.S. Bank National Association, as
Syndication Agent, and the various financial institutions party
thereto (as amended or supplemented from time to time, the
Prior Credit Agreement). As previously disclosed by
the Company, the outstanding debt under the Prior Credit
Agreement matured in accordance with its terms on June12, 2017
and was purchased by funds affiliated with Centre Lane on that
date. The Company expects to use the remaining proceeds to
provide working capital, to pay fees in connection with the New
Credit Agreement, and for other general corporate purposes.
While the New Credit Agreement has provided the Company with
limited incremental borrowing capacity, the Companys overall
liquidity remains constrained. The New Credit Agreement is not
anticipated to materially relieve the liquidity concerns
identified in the Companys Form10-K for the fiscal year ended
December31, 2015 and related earnings release. Investors should
read the sections titled Risk Factors and Managements
Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources set forth in the 2015
Form10-K and any subsequent filings made by the Company with
the U.S. Securities and Exchange Commission.
While not a party to the New Credit Agreement, entities
associated with Wynnefield Capital,Inc. (the Wynnefield
Funds), the Companys largest equity investor, are involved
in the funding of the New Credit Agreement, the terms of which
are disclosed in the Wynnefield Funds Form 13D/A filed with the
Securities and Exchange Commission on the date of this filing.
The Company will include the New Credit Agreement as an exhibit
to its 2016 Annual Report on Form10-K, to be filed with the
U.S. Securities and Exchange Commission. The foregoing
description does not constitute a complete summary of the terms
of the New Credit Agreement and is qualified in its entirety by
reference to the full text of the New Credit Agreement.
Item 2.03 Creation of a Direct
Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report
on Form8-K is incorporated by reference into this Item2.03.
About Global Power Equipment Group Inc. (OTCMKTS:GLPW)
Global Power Equipment Group Inc. is a design, engineering and manufacturing company providing an array of equipment and services to the global power infrastructure, energy and process industries. The Products segment includes two primary product categories: Mechanical Solutions, which designs, engineers and manufactures a portfolio of equipment for utility-scale natural gas turbines, and Electrical Solutions, which provides custom-configured electrical houses and generator enclosures for various industries. The Services segment provides lifecycle maintenance, repair, on-site specialty support, outage management, construction and fabrication services for the power generation, industrial, chemical/petrochemical processing, and oil and gas industries. Its products portfolio span from auxiliary equipment for gas turbines to small, high alloy parts, such as seals, shims and brackets. It also offers a range of services that have been managing plant asset value.