| Item 1.01. | Entry into a Definitive Material Agreement |
On June 11, 2019, CECO Environmental Corp. (“CECO” or the “Company”) entered into a Second Amended and Restated Credit Agreement among the Company, certain of the Company’s subsidiaries, the lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other L/C Issuers from time to time party thereto (the “New Credit Agreement”). The New Credit Agreement amends CECO’s existing Amended and Restated Credit Agreement, dated as of September 3, 2015, by and among the Company, the lenders party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other L/C Issuers party thereto.
The New Credit Agreement provides for senior credit facilities consisting of: (a) revolving credit commitments in the aggregate amount of $140.0 million (the “Revolving Credit Facility”) and (b) a term loan commitment in the aggregate amount of $50.0 million (the “Term Loan” and, together with the Revolving Credit Facility, the “Credit Facilities”). At CECO’s option and with the consent of the lenders that agree to provide the additional principal amount, the Credit Facilities may be further increased by an aggregate principal amount of up to the sum of $75.0 million and an amount such that the Consolidated Net Leverage Ratio (as defined in the New Credit Agreement) would not exceed 3.0 to 1.0.
The Credit Facilities will accrue interest (a) with respect to base rate loans, at an annual rate equal to an applicable rate of between 0.75% and 1.75% (fluctuating based on CECO’s Consolidated Net Leverage Ratio), plus a rate equal to the highest of (1) the Bank of America, N.A., prime rate, (2) the Federal Funds rate plus 0.50%, (3) the Eurocurrency Rate plus 1.00% and (4) 1.00%, and (b) with respect to Eurocurrency Rate loans, at an annual rate equal to an applicable rate of between 1.75% and 2.75% (fluctuating based on CECO’s Consolidated Net Leverage Ratio), plus a rate determined based on the denominated currency (1) if denominated in a U.S. Dollars, Euro, Sterling, Swiss Franc or Yen, the LIBOR rate, (2) if denominated in Canadian dollars, the rate per annum equal to the Canadian Dealer Offered Rate, or a comparable or successor rate which rate is approved by Bank of America, N.A., or (3) if denominated in a currency other than (1) or (2), the rate per annum as designated with respect to such currency at the time such currency was approved by Bank of America, N.A., and the other lenders under the Revolving Credit Facility or, if such rate is unavailable on any date of determination for any reason, a comparable or successor rate approved by Bank of America, N.A.
The Credit Facilities will mature on June 11, 2024. The parties to the New Credit Agreement provided covenants and made representations and warranties that are usual and customary for transactions of this type. With respect to financial covenants, the Company is required to maintain a Consolidated Net Leverage Ratio of (i) for each four fiscal quarter period ending June 30, 2019 through September 30, 2020, not greater than 3.75 to 1.00, (ii) for each four fiscal quarter period ending December 31, 2020 through September 30, 2021, not greater than 3.50 to 1.00 and (iii) for each four fiscal quarter period thereafter, not greater than 3.25 to 1.00. At the election of the Company and subject to certain restrictions contained in the New Credit Agreement, such maximum Consolidated Net Leverage Ratio may be increased by 0.50 to 1.00 (but in no event shall exceed 4.00 to 1.00) following a Permitted Acquisition (as defined in the New Credit Agreement) involving aggregate consideration of $15.0 million or more and such elevated ratio shall continue for the subsequent three fiscal quarters. The Company is also required to maintain a Consolidated Fixed Charge Coverage Ratio (as defined in the New Credit Agreement) as of the most recently completed fiscal quarter of not less than 1.25 to 1.00. The New Credit Agreement also contains customary events of default.
Certain of the lenders, as well as certain of their respective affiliates, have performed and may in the future perform for the Company, various commercial banking, investment banking, lending, underwriting, trust services, financial advisory and other financial services, for which they have received and may in the future receive customary fees and expenses.
The foregoing description of the New Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the New Credit Agreement, a copy of which is attached hereto as Exhibit 10.1, and is incorporated by reference herein.
