Black Diamond Group completed a four-year secured asset-based revolving credit facility. The facility is expected to close within the next week and is subject to customary closing conditions.
The lending syndicate is co-lead by The Bank of Nova Scotia and Bank of Montreal with a maximum $200 million revolving line, plus an uncommitted $50 million accordion.
The facility will replace the company’s current debt which, as at June 30, 2019 consisted of $44 million of privately placed senior secured notes and a $100 million credit facility, of which $50 million was drawn. Based on current market rates and the company’s financial position, Black Diamond expects effective annual interest rate savings in the range of 150 to 200 basis points, excluding any one-time costs.
The borrowing base, or available amount at any given time under the facility is based on 85% to 90% of the net orderly liquidation value of eligible rental fleet and qualified receivables, up to $200 million. The borrowing base at close will be $172 million, representing available liquidity or excess capacity under the facility at approximately $80 million.
With respect to financial covenants, the company will be required to maintain a fixed charge coverage ratio of 1.1 to 1; however, this covenant is only tested in certain instances, such as when draws under the facility exceed 90% of the borrowing base.
As part of the facility setup process, an independent third-party appraisal of the company’s U.S. and Canadian Modular Space Solutions and U.S. Energy Services assets was commissioned. These assets were appraised with a NOLV of slightly above $180 million, which is approximately equal to the current net book value of these assets on the company’s balance sheet. The appraised assets account for approximately half of Black Diamond’s capital assets by net book value.
“With a committed facility through to October 2023, we are taking advantage of our strong financial position to increase our liquidity, while reducing interest costs,” said Toby LaBrie, chief financial officer for Black Diamond. “By leveraging the intrinsic value of our high-quality fleet of assets, this type of financing is a highly flexible and cost-effective method to support the growth of our diversified MSS business.”
Black Diamond is a specialty rentals and industrial services company operating in Canada, the U.S., and Australia.