Power Solutions International, a leader in the design, engineering and manufacture of emission-certified engines and power systems, entered into an amended $130.0 million uncommitted senior secured revolving credit agreement with Standard Chartered Bank as administrative agent, and the lenders party thereto from time to time. The Second Amended and Restated Credit Agreement, which is fully drawn as of this date, extends the maturity date of loans outstanding under the Company’s previous credit facility to the earlier of March 24, 2023 or the demand of Standard Chartered. As part of the amendment, Standard Chartered agreed to waive any existing event of default under the existing credit agreement, resulting from the breach of the financial covenants for the quarter ended December 31, 2021. No additional fee was incurred with this waiver.
The Second Amended and Restated Credit Agreement is subject to customary events of default and covenants, including minimum consolidated EBITDA and Consolidated Interest Coverage Ratio covenants for the second and third quarters of 2022. Borrowings under the Second Amended and Restated Credit Agreement will incur interest at either the alternate base rate or the Secured Overnight Financing Rate (“SOFR”) plus 2.95% per annum.
The obligations under the Second Amended and Restated Credit Agreement are unconditionally guaranteed, on a joint and several basis, by certain wholly-owned, existing and subsequently acquired or formed direct and indirect domestic subsidiaries of the Company, subject to customary exceptions. The obligations under the Second Amended and Restated Credit Agreement are secured by substantially all assets of the Company and the Company’s wholly-owned subsidiaries.
In connection with the Second Amended and Restated Credit Agreement, on March 25, 2022, the Company also amended two of its three separate shareholder’s loan agreements with its majority stockholder, Weichai America Corp. (“Weichai”), to among other things, extend the maturities thereof. The first shareholder’s loan agreement (the “First Shareholder’s Loan Agreement”), which was set to mature on April 25, 2022, provides the Company with a $130.0 million subordinated loan under which Weichai is obligated to advance funds solely for purposes of repaying outstanding borrowings under the Second Amended and Restated Credit Agreement if the Company is unable to pay such borrowings. The second shareholder’s loan agreement (the “Second Shareholder’s Loan Agreement”), which was set to mature on May 20, 2022, provides the Company with a $25 million subordinated loan at the discretion of Weichai. The maturity of the First Shareholder’s Loan Agreement was extended to April 24, 2023, and the maturity of the Second Shareholder’s Loan Agreement was extended to May 20, 2023. Borrowings under both agreements will bear interest at an annual rate equal to SOFR plus 4.65% per annum. Further, if the applicable term SOFR is negative, the interest rate per annum shall be deemed as 4.65% per annum. If the interest rate for any loan is lower than Weichai’s borrowing cost, the interest rate for such loan shall be equal to Weichai’s borrowing cost plus 1%. Both of the agreements are subject to customary events of default and covenants. The Company has covenanted to secure any amounts borrowed under either of the agreements upon payment in full of all amounts outstanding under the Second Amended and Restated Credit Agreement.
As of March 24, 2022, there were no borrowings under the First Shareholder’s Loan Agreement and the Second Shareholder’s Loan Agreement was fully drawn.
The Company is also party to a third shareholder’s loan agreement with Weichai (the “Third Shareholder’s Loan Agreement”). The Third Shareholder’s Loan Agreement, which matures on November 30, 2022, provides the Company with access to up to $50 million of credit at the discretion of Weichai. The Company intends to work with Weichai to extend the Third Shareholder’s Loan Agreement as the maturity date approaches. As of March 24, 2022, PSI had borrowed approximately $36 million under the Third Shareholder’s Loan Agreement.