Steel Dynamics (STLD) Amends Credit Agreement with Various Lenders
In a Form 8-K last night, Steel Dynamics (Nasdaq: STLD) disclosed that on June 12 it entered into an agreement to amend and restate its credit agreement with various lenders.
In summary, the Amendment modified certain financial covenants, effecting a temporary waiver of two such covenants; modified applicable interest rates; and made effective a provision relating to borrowing limitations. With respect to the financial covenants, the Interest Coverage Ratio previously required to be maintained by the Company at not less than 2.00 : 1.00 is decreased to 1.25 : 1.00 for the fiscal quarters ending June 30, 2009 through December 31, 2009; thereafter increasing to 2.00 : 1.00 for the fiscal quarters ending March 31, 2010 through June 30, 2010; and increasing to 2.5 : 1.00 for the fiscal quarters ending September 30, 2010 and thereafter. The requirement that the ratio of Total Debt to Consolidated EBITDA be maintained at not more than 5.00 : 1.00 has been suspended until the fiscal quarter ending December 31, 2010. Also, a new covenant has been imposed, limiting the ratio of First Lien Debt to Consolidated EBITDA to 2.50 : 1.00 through the fiscal quarter ending September 30, 2010, and to 3.00 : 1.00 thereafter.
Pursuant to the terms of the Amendment, any time the amount outstanding under the Company’s revolving line of credit (the “Revolver”) exceeds a borrowing base consisting of 85% of the book value of accounts receivable and 65% of the book value of inventory (the “Borrowing Base”), the Company will be required to immediately repay the amount by which the Revolver exceeds the Borrowing Base.
With respect to interest rates, the Applicable Margin (the rate in addition to the variable base rate) was increased from a range of 0.00% to 1.75%, depending on the type of advance and ratio of Total Debt to consolidated EBITDA, to a range of 1.00% to 3.50%. Further, the rate for the commitment fee applicable to the unused amount of the Revolver has increased to 0.50%, from a rate based on a sliding scale from 0.20 % to 0.35% depending on the ratio of Total Debt to consolidated EBITDA.
In addition, a new covenant requires that the Company prepay the Revolver with certain proceeds of debt incurred or issued by the Company or its subsidiaries if, at or about the time of the incurrence or issuance of such debt, the ratio of Total Debt to consolidated EBITDA exceeds 5.00 : 1.00.
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