CES Energy Solutions Corp T.CEU

From TD this Morning

[savyinvestor333]

Event CES announced that it has amended and extended its credit facility through to 2026.
Impact: POSITIVE
Details: CES' restated credit agreement now contemplates an ~$700.0 million facility (~$425.0 million previously), including a $250.0 million term loan facility (nil previously) and an aggregate revolving facility of ~$450.0 million (~$425 million previously).
Finally, the amended agreement also includes a $50.0 million accordion feature. Importantly, the term loan can only be used to repay the 6.375% senior notes due October 21, 2024 and must be drawn before December 1, 2023.
Both the term loan and revolving facility mature on April 25, 2026 (September 28, 2024 previously). At year-end, CES had $209.3 million drawn on its credit facility and $288.0 million of 2024 senior notes.
TD View:
Although energy-sector fundamentals have improved significantly, we note that CES is a working-capital-inventive business and calculate that both working capital and net debt have increased by $364.7 million and $247.5 million over the past six quarters, respectively. In this context, we believe that it would have been extremely challenging for CES to refinance its senior notes in the current interest rate and broader credit environment. To this end, the amended credit facility allows CES to extend credit maturities, avoid a punitive high-yield raise, and create a straightforward path to debt repayment, given the plateauing of broader North American industry activity that will not require further investments in working capital and allow CES to generate meaningful free-cash-flow in 2023 (2023E FCF: $272.7 million) and beyond.
Recall that with Q4/22 results (full report), CES reduced its drawn balance on its credit facility by $50.5 million, and we expect that CES will continue to focus on reducing the drawn balance on its credit facility in the near term.

[ddogold]

Thanks for the posts savy 

[retiredcf]

They maintain their $5.00 target. GLTA