Atlas Engineered Products Ltd. (CVE:AEP) (OTCMKTS:APEUF) said it has signed a new credit and banking agreement with TD Canada Trust.
The new credit facilities include a C$2.0 million uncommitted revolving line of credit, a C$4.8 million reducing term loan, a C$5.5 million committed revolving line of credit, and a C$2.0m non-revolving equipment leasing line.
READ: Atlas Engineered Products sees increasing revenues and posts a profit in its 3Q
In a statement, Atlas Engineered Products CEO & president, Dirk Maritz said: "We are excited with this new financing and credit partnership with TD Canada Trust of up to C$14.3 million. With this agreement, we replace our current, more restrictive, credit facilities with increased financing options, a group of credit products and a structure that is tailored to our high growth business needs.
"It replaces the bulk of our current debt, supports our day-to-day banking, while meeting the demands of our future financing needs that will support our growth. The Company has good liquidity, and this agreement positions AEP to continue our M&A activities, as well as allows for our continued focus on plant upgrades, automation, and product expansion," he added.
The group said the revolving line of credit will be available to finance the company's working capital needs, small capital expenditures, and for general corporate purposes. Repayment will be on-demand and interest will be payable monthly.
The term loan will be used to refinance existing debt and will be amortized over seven years with monthly payments of principal and interest. The revolver will be a credit facility available to the company for general corporate purposes and acquisitions as needed. It has a term of three years, which can be extended by agreement of the parties and interest will be payable monthly.
The equipment line of credit is a facility available to the company that will be available to finance new assets, upgrading existing assets and/or could be used in combination for equipment in acquisitions. Amounts advanced under it will be amortized for up to 84 months depending on the class of asset, with principal and interest payable monthly.
The new agreement will have updated financial covenants, which include a maximum total debt to adjusted EBITDA (Total Leverage Ratio) and a minimum fixed charge coverage ratio (FCC Ratio). Both covenants will be tested quarterly on a 12-month rolling basis. The Total Leverage Ratio will be stepping down as follows: less than or equal to 3.00x on December 31, 2020, less than or equal to 2.75x on December 31, 2021. The FCC Ratio must be greater than or equal to 1.15x.
Interest on the term loan and the revolver will be at a variable rate tied to the Total Leverage Ratio, current prime rates, and LIBOR. Based on the current Canada prime rate, the interest will be between 3.7% and 5.95% per annum on drawn amounts and between 0.25% and 0.50% per annum on any undrawn amounts of the revolver.
The credit facilities are secured by a General Security Agreement in all undertakings, property, and assets of Atlas Engineered Products, and a guarantee and pledge of shares from the company and all subsidiaries. The company is also subject to other terms, reporting covenants, fees, and cost reimbursements standard and customary for similar agreements.
In addition to the new credit facilities, TD Canada Trust will also provide the company with day-to-day banking and access to their other services as required.
Atlas Engineered Products is a growth company that is acquiring and operating profitable, well-established operations in Canada's truss and engineered products industry. It has a well-defined and disciplined acquisition and operating growth strategy enabling it to scale aggressively, giving the group a unique opportunity to consolidate a fragmented industry of independent operators.
Contact the author at jon.hopkins@proactiveinvestors.com
