ARF Announces Covenant Relief and New Short-Term Credit Fac Armtec Infrastructure Inc. Announces Availability of Covenant Relief and New Short-Term Credit Facility
CONCORD, ON, June 11, 2014 /CNW/ - Armtec Infrastructure Inc. ("Armtec" or the "Company") (TSX: ARF; ARF.DB) announced today that it has achieved its Senior Secured Debt to EBITDA covenant under its term facility (the "Term Facility") with Brookfield Capital Partners Fund III LP ("Brookfield") (the "Covenant") as at May 31, 2014 and that it has entered into a memorandum of understanding with Brookfield in connection with amending the Term Facility (the "Amendment").
Armtec previously disclosed that its performance during the first half of 2014 is expected to put pressure on its near-term liquidity position and the Covenant. Accordingly, the Company has been reviewing alternatives in order to deliver the most economical solution to address both its liquidity tightness and Covenant concerns.
The Covenant currently requires Armtec to maintain a Senior Secured Debt to EBITDA ratio of no greater than 5.25:1 (the "Ratio"). The Amendment will provide Armtec with a waiver of the Covenant in the event that such relief is required (the "Covenant Waiver"). The Covenant Waiver will be in effect until July 15, 2014 and may be extended to September 30, 2014, at Armtec's option, prior to July 15, 2014. If the Covenant Waiver is exercised, the Covenant calculations would recommence on October 31, 2014.
The Amendment will also make available to Armtec a short-term credit facility in the principal amount of up to $7.5 million, at an interest rate equal to the 30-day Banker's Acceptance (BA) rate plus 12.0% (the "Short Term Facility"). The Short Term Facility will mature on September 19, 2014.
In the event that (i) Armtec exceeds the Ratio at June 30, 2014, (ii) Armtec elects to extend the Covenant Waiver by July 15, 2014 or (iii) Armtec elects to access the Short Term Facility, Armtec will be required to pay to Brookfield a waiver fee of $2 million and a standby fee of $250,000 for the Short Term Facility. In addition, a draw fee of $250,000 will be payable by Armtec should it use the Short Term Facility. Armtec has the option to defer payment of each of the waiver fee, standby fee and draw fee, in which case such amounts will be added to the principal of the Term Facility; however, these fees will be excluded from future Covenant calculations.
The Amendment remains subject to the parties entering into mutually acceptable definitive documentation. Armtec's revolving credit facility will also be amended to accommodate the Short Term Facility.
Armtec has agreed to publically disclose certain information that was provided to potential lenders in connection with the review of alternate solutions. Accordingly, at this time, Armtec anticipates its consolidated revenue, consolidated EBITDA, consolidated capital expenditure and consolidated secured debt for the balance of 2014 to be approximately as follows:
| | Quarter Ending | Year Ending |
| (millions) | June 30 | September 30 | December 31 |
| Consolidated Revenue | $120 | $155 | $470 |
| Consolidated EBITDA | $12 | $20 | $34 |
Consolidated Capital
Expenditures | $2 | $2 | $8 |
Consolidated Secured Debt
(as calculated for covenant
purposes) | $160 | $162 | $140 |
These forecasts are based upon anticipated stronger revenue in the second half of 2014 in both the Drainage Solutions ("Drainage") and Precast Concrete Solutions ("Precast") Business Units. Improved demand for drainage products is expected to be supported by some recovery of the unfavourable installation conditions experienced in the first half of 2014, but this increase will be partially offset by softer international market activity. Despite the anticipated volume increase, Drainage continues to face competitive pricing pressures in Western Canada, which is expected to impact both revenue and EBITDA.
The stronger second-half demand anticipated for Precast is based on customer schedule delays from the first half of 2014 being resolved and increased demand in the Prairie and Soundwall market areas. These improvements are expected to be partially offset by the completion of the Kitimat smelter modernization project in the Pacific market area and the softness in the Ontario marketplace. Armtec's portion of the Kitimat smelter modernization project was announced in December of 2011 to supply precast components to expand and upgrade Rio Tinto Alcan's aluminum smelter in Kitimat, British Columbia.