Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
SEPTEMBER 14, 2001
BLACK WARRIOR WIRELINE CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-18754 11-2904094
--------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3748 HIGHWAY 45 NORTH, COLUMBUS, MISSISSIPPI 39701
--------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (662) 329-1047
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
GE Capital Credit Facility. On September 14, 2001, the Company entered
into a Credit Agreement with General Electric Capital Corporation, as agent and
lender, ("GE Capital") providing for the extension of revolving, term and capex
credit facilities to the Company aggregating up to $40.0 million (referred to
herein as the "Credit Facility"). The Credit Facility includes a revolving loan
of up to $15.0 million, but not exceeding 85% of eligible accounts receivable, a
term loan of $17.0 million, and a capex loan of up to $8.0 million, but not
exceeding the lesser of 70% of the hard costs of acquired eligible equipment and
100% of its forced liquidation value. The interest rate on borrowings under the
revolving loan is 1.75% above a base rate and on borrowings under the term loan
and capex loan is 2.5% above the base rate. The base rate is the higher of (i)
the rate publicly quoted from time to time by the Wall Street Journal as the
base rate on corporate loans posted by at least 75% of the nation's thirty
largest banks, or (ii) the average of the rates on overnight Federal funds
transactions by members of the Federal Reserve System, plus 0.5%. Subject to the
absence of an event of default and fulfillment of certain other conditions, the
Company can elect to borrow or convert any loan and pay interest at the LIBOR
rate plus applicable margins of 3.25% on the revolving loan and 4.0% on the term
loan and capex loan. If an event of default has occurred, the interest rate is
increased by 2%. Advances under the Credit Facility are collateralized by a
senior lien against substantially all of the Company's assets. The Credit
Facility expires on September 14, 2004. Initial borrowings under the Credit
Facility advanced on September 14, 2001 aggregated $21.6 million.
Proceeds of borrowings were used to repay outstanding indebtedness
aggregating $21.4 million to Coast Business Credit ("Coast"), Bendover Company
("Bendover") and certain other indebtedness. The balance of the borrowing
availability may be used for working capital, capital expenditures and general
corporate needs. Borrowings under the revolving loan are able to be repaid and
re-borrowed from time, subject to the Company's continuing compliance with the
terms of the agreement, with the outstanding balance of the revolving loan to be
paid in full at the expiration of the Credit Facility on September 14, 2004..
The term loan is to be repaid in 35 equal monthly installments of $283,333 with
a final installment of $7,083,333 due and payable on September 14, 2004. The
capex loan is available to be borrowed through September 14, 2003 and is to be
repaid in equal monthly installments of 1/60th of each of the amounts borrowed
from time to time with the remaining outstanding balance of the entire capex
loan due and payable on September 14, 2004
Borrowings under the Credit Facility may be prepaid or the facility
terminated or reduced by the Company at any time subject to the payment of an
amount equal to 3% of the prepayment or reduction occurring before September 14,
2002, 2% of the prepayment or reduction occurring
-2-
thereafter but before September 14, 2003, and 1% of the prepayment or reduction
occurring thereafter but before September 14, 2004. In the event all the stock
or substantially all the assets of the Company are sold prior to September 14,
2003, and in connection therewith, the Company pre-pays the Credit Facility, the
amount of such payment is reduced to 1%. The Company is required to prepay
borrowings out of the net proceeds from the sale of any assets, subject to
certain exceptions, or the stock of any subsidiary, the net proceeds from the
sale of any stock or debt securities by the Company, and any borrowings in
excess of the applicable borrowing availability.
Initial borrowings under the Credit Facility were subject to the
fulfillment at or before the closing of a number of closing conditions,
including among others, the accuracy of the representations and warranties made
by the Company in the loan agreement, delivery of executed loan documents,
officers' certificates, an opinion of counsel, repayment of the Coast senior
secured loan, the extension of the maturity date of $26.4 million principal
amount of the Company's outstanding subordinated notes to December 31, 2004 with
no payments of principal or interest to be made prior to that date, and the
completion of due diligence. Future advances are subject to the continuing
accuracy of the Company's representations and warranties as of such date (other
than those relating expressly to an earlier date), the absence of any event or
circumstance constituting a "material adverse effect," as defined, the absence
of any default or event of default under the Credit Facility, and the borrowings
not exceeding the applicable borrowing availability under the Credit Facility,
after giving effect to such advance. A "material adverse effect" is defined to
include an event having a material adverse effect on the Company's business,
assets, operations, prospects or financial or other condition, on the Company's
ability to pay the loans, or on the collateral and also includes a decline in
the "Average Rig Count" (excluding Canada and international rigs) published by
Baker Hughes, Inc. falling below 675 for 12 consecutive weeks.
Under the Credit Facility, the Company is obligated to maintain
compliance with a number of affirmative and negative covenants. Affirmative
covenants the Company must comply with include requirements to maintain of its
corporate existence and continue the conduct of its business substantially as
now conducted, promptly pay all taxes and governmental assessments and levies,
maintain its corporate records, maintain insurance, comply with applicable laws
and regulations, provide supplemental disclosure to the lenders, conduct its
affairs without violating the intellectual property of others, conduct its
operations in compliance with environmental laws, provide a mortgage or deed of
trust to the lenders granting a first lien on the Company's real estate upon the
request of the lenders, provide certificates of title on newly acquired
equipment with the lender's lien noted, obtain the consents of the holders of
the Company's subordinated notes, no later than January 14, 2002, consenting to
any senior indebtedness that refinances the Company's obligations under the
Credit Facility and to the
-3-
aggregate amount of loans under the Credit Facility or refinancing of the Credit
Facility be increased to an aggregate of $43.0 million, pre-pay no later than
September 28, 2001 or cause St. James Capital Corp., SJMB, L.P., or SJMB, LLC to
purchase by that date any of the Company's outstanding subordinated notes that
have not executed the subordination agreement required by the Credit Facility.
Negative covenants the Company may not violate include, among others,
(i) forming or acquiring a subsidiary, merging with, acquiring all or
substantially all the assets or stock of another person, (ii) making an
investment in or loan to another person, (iii) incurring any indebtedness other
than permitted indebtedness, (iv) entering into any transaction with an
affiliate except on fair and reasonable terms no less favorable than would be
obtained from a non-affiliated person, (v) making loans to employees in amounts
exceeding $50,000 to any employee and a maximum of $250,000 in the aggregate,
(vi) making any change in its business objectives or operations that would
adversely affect repayment of the loans or in its capital structure, including
the issuance of any stock, warrants or convertible securities other than (A) on
exercise of outstanding securities or rights, (B) the grant of stock in exchange
for extensions of subordinated debt, (C) options granted under an existing or
future incentive option plan, or (D) in its charter or by-laws that would
adversely affect the ability of the Company to repay the indebtedness, (vii)
creating or permitting to exist any liens on its properties or assets, with the
exception of those granted to the lenders or in existence on the date of making
the loan, (viii) selling any of its properties or other assets, including the
stock of any subsidiary, except inventory in the ordinary course of business and
equipment or fixtures with a value not exceeding $100,000 per transaction and
$250,000 per year, (ix) failing to comply with the various financial covenants
in the loan agreement, (x) making any restricted payment, including payment of
dividends, stock or warrant redemptions, repaying subordinated debt, recision of
the sale of outstanding stock, (xi) making any payments to stockholders of the
Company other than compensation to employees and payments of management fees to
any stockholder or affiliate of the Company, or (xii) amending or changing the
terms of the Company's subordinated debt.
The financial covenants the Company is required to comply with include
(a) limitations on capital expenditures to $9.0 million during the period June
1, 2001 through December 31, 2001, $8.0 million during each of the years 2002
and 2003 and $5.0 million during the six-months ended June 30, 2004, (b) having
a fixed charge coverage ratio at the end of each quarter, commencing with the
quarter ended December 31, 2001, of not less than 1.3:1.0 for the preceding
twelve-month period (or, for quarters ending before September 30, 2002, for the
period commencing October 1, 2001 and ending on the last day of the quarter),
(c) having an interest coverage ratio at the end of each quarter, commencing
with the quarter ended December 31, 2001, of not less than 3.0:1.0 for the
preceding twelve-month period (or, for quarters ending before September 30,
2002, for the period commencing October 1, 2001 and ending on the last
-4-
day of the quarter), (d) commencing with the quarter ending December 31, 2001,
having a ratio of senior funded debt to EBITDA, minus capital expenditures paid
in cash, of not more than 2:0:1.0 for the four fiscal quarters then ended, and
(e) having an EBITDA of not less than $17.0 million for the three quarters
ending September 30, 2001.
Events of default under the Credit Facility include (a) the failure to
pay when due principal or interest or fees owing under the Credit Facility, (b)
the failure to perform the covenants under the Credit Facility relating to use
of proceeds, maintenance of a cash management system, maintenance of insurance,
delivery of certificates of title, delivery of required consents of holders of
outstanding subordinated notes, maintenance of compliance with the financial
covenants in the loan agreement and compliance with any of the loan agreement's
negative covenants, (c) the failure, within specified periods of 3 or 5 days of
when due, to deliver monthly unaudited and annual audited financial statements,
annual operating plans, and other reports, notices and information, (d) the
failure to perform any other provision of the loan agreement which remains
un-remedied for 20 days or more, (e) a default or breach under any other
agreement to which the Company is a party beyond any grace period that involves
the failure to pay in excess of $250,000 or causes or permits to cause in excess
of $250,000 of indebtedness to become due prior to its stated maturity, (f) any
representation or warranty or certificate delivered to the lenders being untrue
or incorrect in any material respect, (g) a change of control of the Company,
(h) the occurrence of an event having a material adverse effect, and (i) the
attachment, seizure or levy upon of assets of the Company which continues for 30
days or more and various other bankruptcy and other events. Upon the occurrence
of a default or event of default, the lenders may discontinue making loans to
the Company. Upon the occurrence of an event of default, the lenders may
terminate the Credit Facility, declare all indebtedness outstanding under the
Credit Facility due and payable, and exercise any of their rights under the
Credit Facility which includes the ability to foreclose on the Company's assets.
Reference is made to the Credit Agreement filed as an Exhibit hereto
for a complete statement of the terms and conditions.
Extension of Subordinated Debt.
------------------------------
At or before the closing under the Credit Facility , the holders of
$26,266,882 of the Company's subordinated debt agreed to the extension of the
maturity date of that debt to December 31, 2004 and executed the subordination
agreement required by the terms of the Credit Facility.
-5-
In addition, as of October 5, 2001, the holders of $26,041,882 of the
Company's outstanding subordinated debt have consented to permitting the Company
to incur any indebtedness that refinances the Credit Facility and agreed that
the aggregate amount of loans able to be borrowed under the Credit Facility or
any refinancing of the Credit Facility may be increased to $43.0 million.
Repayment of Bendover Indebtedness.
----------------------------------
On September 12, 2001, the Company paid to Bendover the sum of
$1,101,870 in exchange for a release from Bendover of all claims and obligations
including claims under the Company's promissory note dated December 20, 1999 in
the principal amount of $1,182,890.25 plus interest and claims in the lawsuit
instituted by Bendover in the District Court, Montgomery County, Texas on July
20, 2001 seeking to recover on the note. Concurrently, Allen Mann resigned as a
Director of the Company.
Other Matters.
-------------
The Company has agreed to pay to SJMB, L.P. a fee of $273,731.94 in
consideration of SJMB, L.P. providing cash collateral of $8.2 million
deposited to secure the performance of the continuing guaranty extended by
SJMB, L.P. of the Company's borrowing from Coast. In addition, SJMB, L.L.C.
received a fee of $200,000 for services provided by SJMB, L.L.C. in
connection with the Company's borrowing from GE Capital. Under the terms of
the Credit Facility, the Company is restricted from paying any further sums to
either of SJMB, L.P. or SJMB, L.L.C. unless the Company's quarterly report
on Form 10-Q reflects that the Company had EBITDA of at least $7.0 million for
the quarter ended September 30, 2001 and the amount of such payment is
limited to no more than $150,000. Assuming the EDITDA sum is met, payment of
$150,000 would be made to SJMB, L.P. and payment of the balance would be
deferred.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) None required.
(b) None required.
(c) Exhibits:
-6-
Exhibit Number Description of Document
------------------------- ------------------------------------------------
10.37.1 Credit Agreement dated as of September 14, 2001
among the Company and General Electric Capital
Corporation, as agent and lender.
10.37.2 Revolving Note in the principal amount of $15.0
million dated September 14, 2001.
10.37.3 Term Note in the principal amount of $17.0
million dated September 14, 2001.
10.37.4 Form of Capex Note.
10.37.5 Security Agreement dated September 14, 2001
between the Company and General Electric Capital
Corporation.
10.37.6 Annex A to Credit Agreement - Definitions
10.37.7 Annex F to Credit Agreement - Financial Covenants
-7-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BLACK WARRIOR WIRELINE CORP.
Dated: October 5, 2001 By: /s/ William L. Jenkins
-----------------------------
William L. Jenkins, President
-8-