| Item 1.01. | Entry into a Material Definitive Agreement. |
On December 28, 2020, Power Solutions International, Inc. (the “Company” or “PSI”) entered into the First Amendment to Credit Agreement and Limited Waiver (the “Amendment”) to its Credit Agreement, dated as of March 27, 2020, with Standard Chartered Bank, as administrative agent, and the lenders party thereto from time to time (the “Credit Agreement”). The Amendment waives certain existing events of default under the Credit Agreement for failure to comply with the minimum consolidated EBITDA covenant for the quarters ended June 30, 2020 and September 30, 2020. The Amendment also, among other things, removes the 60-day maturity date extension option, amends the calculations of the interest coverage ratio and minimum Consolidated EBITDA and adjusts the required interest coverage ratio levels and minimum consolidated EBITDA levels. The $130 million aggregate commitment amount of the Credit Agreement, maturity date of March 26, 2021 and applicable interest rate of the Credit Agreement remain unchanged.
In connection with the Amendment, the Company also entered into the Shareholder’s Loan Agreement between the Company and Weichai America Corp. (“Weichai”), the Company’s majority stockholder (the “Shareholder’s Loan Facility”). Pursuant to the Shareholder’s Loan Facility, Weichai has established an unsecured and uncommitted loan facility in favor of the Company in a maximum principal amount of $100 million. The Shareholder’s Loan Facility matures on April 30, 2021. Loans may be made to the Company pursuant to the Shareholder’s Loan Facility at Weichai’s sole discretion. The proceeds of any loans made under the Shareholder’s Loan Facility shall be used to repay existing obligations under the Credit Agreement. Any potential borrowings under the Shareholder’s Loan Facility will bear interest at an annual rate equal to the London Interbank Offered Rate (“LIBOR”) plus 3.50% per annum. The Shareholder’s Loan Facility is subject to customary events of default and covenants.
In light of the March 26, 2021 maturity date of the Credit Agreement, in 2021 management will continue to hold discussions with its current or other lenders to seek an extension and/or replacement of the Credit Agreement or additional liquidity, however, there can be no assurance that the Company will be able to successfully complete an extension of the Credit Agreement or obtain new financing on acceptable terms or at all when required.
The foregoing descriptions of the Amendment and Shareholder’s Loan Facility are qualified in their entirety by the full text of the Amendment and Shareholder’s Loan Facility, which are attached hereto as Exhibits 10.1 and 10.2, respectively, and incorporated by reference herein.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information included in Item 1.01 of this report is incorporated by reference into this Item 2.03.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws. |
On December 23, 2020, the Board of Directors approved an amendment and restatement of the bylaws of the Company (the “Amended Bylaws”), effective as of such date. The Amended Bylaws were adopted solely to include the following language: “At all times, the Board of Directors shall maintain standing Audit, Compensation and Nominating and Governance Committees, in addition to any other committees deemed necessary by the Board of Directors.”
The foregoing description of the Amended Bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended Bylaws, a copy of which is attached hereto as Exhibit 3.1 and incorporated herein by reference.
| Item 7.01 | Regulation FD Disclosure. |
On December 31, 2020, the Company intends to issue a press release announcing the Amendment, which is attached as Exhibit 99.1 hereto.
