North American Construction Group Ltd. announced an upsized $300 million Amended and Restated Credit Agreement with its banking syndicate led by National Bank Financial. The upsized Credit Facility was executed concurrent with the company's closing of an asset purchase agreement with Aecon Group Inc.
Jason Veenstra, Chief Financial Officer stated, “The acquisition of the heavy equipment fleet of Aecon is an exciting milestone event for NACG and we were pleased to work with our supportive syndicate members to finance this important opportunity. The Credit Facility is consistent with existing terms, maintains attractive rates and provides sufficient flexibility to allow for the $199 million asset transaction to close immediately.”
The Credit Facility more than doubles NACG’s borrowing capacity to $300 million with an ability to increase the maximum borrowings by an additional $50 million, subject to certain customary conditions. It is also important to note that in addition to the upgraded credit facility borrowing capacity, the equipment financing limit has been increased to $150 million up from $100 million allowing for additional borrowing flexibility. The term of the Credit Facility is committed for three years and matures on November 23, 2021, with an option to extend on an annual basis.
The Credit Facility is comprised solely of a revolver with no scheduled repayments and is not governed by a borrowing base that limits available borrowings. Financial covenants are consistent with the previous agreement and are tested quarterly on a trailing four quarter basis. The Credit Facility covenants are in full compliance at time of closing and have been established in consideration of the asset purchase agreement with Aecon.
In addition to the new Credit Facility, the Company recently entered into a 25-year $19.9 million mortgage with Business Development Bank of Canada (“BDC”), which will be drawn upon to cover costs already incurred in relation to the Company’s recent acquisition of land and construction of its maintenance facility and head office complex in Acheson, Alberta. The mortgage, which expires in November 2043, bears interest for the first five years at a fixed rate of 4.85% and is secured by a first security interest in the maintenance and office complex. The BDC mortgage and security are structured as permitted exclusions from the security interests of the syndicate Lenders and the Senior Debt as defined in the Credit Facility.
The Company believes that this facility increase to $300 million and the additional equipment financing limit provides the borrowing capacity required of a heavy equipment operator and supports its strategic priorities while providing the ability to expand its liquidity in line with its growth objectives.