Douglas Dynamics refinanced its existing $375 million in senior secured credit facilities with a new $225 million Term Loan A facility and $100 million senior secured revolving credit facility due June 2026. JPMorgan Chase Bank acted as administrative agent, J.P. Morgan Chase Bank, and CIBC Bank USA, acted as joint lead arrangers and joint bookrunners, CIBC Bank USA acted as syndication agent, and Bank of America and Citizens Bank acted as co-documentation agents. Foley & Lardner LLP served as legal counsel to the company.
“We believe this refinancing transaction provides us with the right capital structure to successfully execute our future growth strategies for the foreseeable future. The new facilities reduce our overall debt profile, reinforce our robust financial position, and ensure we have the flexibility to invest in the business, and still pursue external growth opportunities in the years ahead,” explained Sarah Lauber, Chief Financial Officer.
The proceeds from the borrowings under the new Term Loan A facility and senior secured revolving credit facility will be used for general corporate purposes, including repaying the entirety of the borrowings under the company’s prior $275 million Term Loan B facility due 2026 and its prior $100 million senior secured revolving credit facility.
The new credit agreement provides for a Term Loan A facility in the amount of $225 million and a senior secured revolving credit facility in the amount of $100 million. The company may also request increases to the revolving commitments and/or incremental term loans in an aggregate amount not in excess of $175 million. The Term Loan A facility will bear interest at LIBOR plus a margin ranging from 1.375% to 2.00%, depending on the company’s leverage ratio, as defined in the credit agreement.
The new credit agreement includes customary representations, warranties and negative and affirmative covenants, as well as customary events of default and certain cross default provisions that could result in acceleration of the credit agreement that are similar to the related provisions in the company’s prior Term Loan B and revolving credit facilities. In addition, the credit agreement requires the company to have a leverage ratio of not more than 3.50 to 1.00 as of the last day of any fiscal quarter commencing with fiscal quarter ending June 30, 2021 and to have a consolidated interest coverage ratio, as defined in the credit agreement, of not less than 3.00 to 1.00 as of the last day of any fiscal quarter commencing with fiscal quarter ending June 30, 2021. The agreement also includes a clause allowing the Company to increase its leverage ratio from 3.50 to 1.00 to 4.00 to 1.00 for four quarters in the event the Company completes an acquisition that is valued at or above $75 million.