DMC Global, an owner and operator of manufacturing businesses, closed a five-year, $300 million senior secured credit facility consisting of a $200 million revolving credit facility, a $50 million term loan and a $50 million delayed-draw term loan. The facility replaces DMC’s prior $200 million credit facility. KeyBank is serving as administrative agent for the facility, while a banking syndicate made up of U.S. Bank, Bank of America, Bank of Oklahoma, CIBC, Commerce Bank and Comerica Bank is participating in the deal as well.
“This new credit agreement strengthens our balance sheet and improves our near-term financial flexibility as we pursue strategic alternatives for our DynaEnergetics and NobelClad businesses,and seek to transform DMC’s portfolio,” Michael Kuta, president and CEO of DMC, said. “Our enhanced liquidity will support our growth strategies in the architectural framing industry, including acquiring the remaining 40% minority interest in Arcadia Products.”
In December 2021, DMC acquired a 60% controlling interest in Arcadia Products, a provider of architectural building products to the commercial and ultra-high-end residential construction industries. A put/call option on the remaining 40% stake in Arcadia will become exercisable on Dec. 23, 2024. The current estimated value of the put/call option, net of a tax bridge loan, is approximately $163 million.
“This new credit facility holds our leverage and debt service costs to a prudent level,” Eric Walter, CFO of DMC, said. “We are pleased to have the strong support of our lending group, which has been expanded from four to seven institutions.”
Walter said DMC’s leverage ratio following the close of the credit facility remains at 1.25x and is expected to be approximately 2x if the company executes the call on the 40% minority interest in Arcadia.
DMC will use the $50 million term loan and approximately $70 million of the $200 million revolving credit facility to refinance its existing bank debt. The $50 million delayed-draw term loan and unused capacity on the revolving credit facility will be available to support the purchase of the remaining 40% of Arcadia.
The term loan requires annual amortization of 5% for the first two years, 7.5% for the next two years and 10% in the fifth year with a bullet at maturity. The covenants of the credit facility have a maximum total leverage ratio of 3x and minimum debt service coverage ratio of 1.25x.
