| Item 1.01. | Entry into a Material Definitive Agreement. |
On September 21, 2018, Charah Solutions, Inc. (the “Company”) entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as administrative agent, swingline lender and letter of credit issuer, the other lenders party thereto and certain subsidiary guarantors named therein, providing for (i) a senior secured term loan facility (the “Term Facility”), maturing on September 21, 2023, providing for an initial loan in the aggregate principal amount of $205 million (the “Closing Date Term Loan”) and up to five additional loans, available from September 22, 2018 through March 21, 2020 (the “Delayed Draw Period”), in an aggregate amount not to exceed $25 million (the “Delayed Draw Term Loans”), and (ii) a five-year secured revolving credit facility with an aggregate maximum borrowing capacity of $50 million (the “Revolving Facility”), maturing on September 21, 2023. The borrowing capacity under the Revolving Facility includes up to $20 million available for the issuance of letters of credit and up to $10 million available for swingline loans. Subject to obtaining commitments from the lenders and satisfying other conditions specified in the Credit Agreement, the Company has the option under the Credit Agreement to increase the borrowing capacity under the Term Facility and/or the Revolving Facility by an additional $50 million in the aggregate. Subject to limited exceptions, borrowings under the Term Facility and the Revolving Facility are guaranteed by each of the Company’s subsidiaries and are secured by the personal property assets of the Company and such subsidiaries. Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Credit Agreement.
The Closing Date Term Loan was fully drawn on September 21, 2018 and the proceeds were used by the Company to repay its outstanding indebtedness under its prior Term Loan Agreement dated October 25, 2017. The Company must repay the aggregate principal amount of the Closing Date Term Loan in quarterly principal installments, beginning December 31, 2018, equal to a percentage of the initial aggregate principal amount of the Closing Date Term Loan ranging from 1.25% at closing to 2.5% for fiscal quarters ending on or after December 31, 2022 (the “Amortization Percentage”). The Company must repay the aggregate principal amount of all Delayed Draw Term Loans, if any, in quarterly principal installments, beginning the first fiscal quarter after March 21, 2020, equal to the then-applicable Amortization Percentage of the aggregate principal amount of all Delayed Draw Term Loans made during the Delayed Draw Period. The aggregate principal amount of all borrowings under the Revolving Facility will be due on September 21, 2023. As of September 21, 2018, the Company had outstanding borrowings under the Term Facility of $205.0 million and outstanding borrowings under the Revolving Facility of $17.1 million.
Borrowings under the Credit Agreement bear interest at rates per annum determined by reference to, at the Company’s option, either a base rate (“Base Rate Borrowings”) or an adjusted LIBOR rate (“Eurodollar Rate Borrowings”), plus an applicable margin based on the Consolidated Net Leverage Ratio of the Company and its subsidiaries at the time of the borrowing. Base Rate Borrowings bear interest at (i) the highest of (a) the federal funds rate plus 0.50%, (b) the rate of interest publicly announced by Bank of America as its “prime rate” and (c) the LIBOR rate for deposits in US Dollars for aone-month interest period, plus 1.0%, plus (ii) an applicable margin of between 75 and 175 basis points. Eurodollar Rate Borrowings bear interest at (x) the LIBOR rate for deposits in US Dollars with a term equivalent to the interest period for such borrowing, plus (y) an applicable margin of between 175 and 275 basis points. At the current Consolidated Net Leverage Ratio of the Company and its subsidiaries, the applicable margins would be150 basis points for Base Rate Borrowings and250 basis points for Eurodollar Borrowings. Any amounts that are not paid by the Company when due under the Credit Agreement are subject to the application of default interest rates. The Company may from time to time borrow and prepay (without penalty or premium) amounts under the Credit Agreement and may reborrow amounts under the Revolving Facility, provided the Company complies with the notice and other requirements set forth in the Credit Agreement. The Company’s existing LIBOR interest rate cap, which provides a ceiling on three-month LIBOR at 2.50% for a notional amount of $150 million through March 2023, will remain in place.
In addition, the Company must pay (i) a quarterly commitment fee equal to an applicable margin of between 25 and 35 basis points, depending on the then-current Consolidated Net Leverage Ratio of the Company and its subsidiaries, multiplied by (a) the unused borrowing capacity under the Revolving Facility and (b) during the Delayed Draw Period, the unused borrowing capacity of the Delayed Draw Term Loans under the Term Facility, and (ii) a quarterly letter of credit fee equal to an applicable margin of between 130 and 210 basis points, depending on the then-current Consolidated Net Leverage Ratio of the Company and its subsidiaries, multiplied by the amount available to be drawn under all then-outstanding letters of credit, if any. At the current Consolidated Net Leverage Ratio of the Company and its subsidiaries, the applicable margins would be 35 basis points for calculation of the commitment fee and190 basis points for calculation of the letter of credit fee.
