8-K: Great Lakes Dredge & Dock Secures $150 Million Second Lien Credit Facility

Great Lakes Dredge & Dock Corporation has entered into a $150 million second lien credit agreement to bolster its financial position and fund future projects.

Summary

• Great Lakes Dredge & Dock Corporation has secured a $150 million second lien credit agreement with Guggenheim Corporate Funding, LLC.
• The agreement includes a $100 million term loan funded at closing and a $50 million delayed draw term loan available for 12 months.
• After fees and expenses, the company received approximately $94 million in net proceeds at closing.
• An additional $6 million in fees and expenses are expected in connection with the closing and related transactions.
• The credit agreement includes a minimum liquidity covenant requiring the company to maintain $12.5 million or $50 million in liquidity depending on the fixed charge coverage ratio.
• The loans can be prepaid with a make-whole premium for the first 18 months, subject to a $25 million carve-out for MARAD financing.
• After 18 months, prepayment premiums of 3% and 1% apply in months 19-30 and 31-42, respectively.
• The second lien credit agreement matures on April 24, 2029, or 91 days prior to the maturity of the company's 5.250% Senior Notes due 2029.
• Interest rates are based on either a Base Rate option or a Secured Overnight Financing Rate (SOFR) option, plus applicable margins.
• The company also amended its ABL credit agreement, eliminating its ability to increase commitments and modifying pricing.

Sentiment

Score: 7

Explanation: The document is generally positive as it secures additional funding for the company, but there are some negative aspects such as increased debt and fees.

Positives

• The new credit facility provides the company with additional capital to fund operations and future projects.
• The delayed draw term loan provides flexibility for future funding needs.
• The company has secured a significant amount of capital with a long-term maturity.

Negatives

• The company will incur additional fees and expenses related to the new credit facility and ABL amendment.
• The new credit facility is secured by a second-priority lien on substantially all of the company's assets.
• The company is subject to minimum liquidity covenants and mandatory prepayment terms.

Risks

• The company's financial performance may be impacted by its ability to meet the minimum liquidity covenants.
• The company's ability to prepay the loans may be limited by the make-whole premium and other prepayment terms.
• The company's obligations under the second lien credit agreement are subordinated to the obligations under the ABL credit agreement.

Future Outlook

The delayed draw portion of the term loans, if funded, will be used to fund future newbuild payments, ongoing working capital and for other general corporate purposes.

Industry Context

This announcement reflects a trend of companies seeking diverse financing options to support growth and capital expenditures in the dredging and marine construction industry.

Comparison to Industry Standards

• The use of a second lien credit facility is a common financing strategy for companies seeking additional capital while maintaining existing debt structures.
• The interest rates and prepayment terms are generally consistent with market standards for similar types of credit facilities.
• The minimum liquidity covenants are typical for companies in this industry and reflect the need to maintain a certain level of financial stability.

Stakeholder Impact

• Shareholders may view the new credit facility as a positive step towards securing the company's financial future.
• Employees may benefit from the company's increased financial stability and ability to fund future projects.
• Customers may see the company as a more reliable partner due to its improved financial position.
• Suppliers may have increased confidence in the company's ability to pay its obligations.
• Creditors may view the new credit facility as a positive sign of the company's financial health.

Next Steps

• The company will use the proceeds of the term loan to repay amounts outstanding under the ABL Credit Agreement, pay fees and expenses, and for general corporate purposes.
• The company will use the delayed draw term loan to fund future newbuild payments, ongoing working capital and for other general corporate purposes.

Key Dates

Keywords

second lien credit agreement, term loan, delayed draw, liquidity covenant, prepayment premium, ABL amendment, Guggenheim Corporate Funding, Great Lakes Dredge & Dock, MARAD financing, senior notes