As part of its manufacturing repositioning and business transformation strategy, FreightCar America obtained a new asset-backed credit facility with a maximum aggregate principal amount of up to $20 million, subject to a borrowing base, with Siena Lending Group as lender.
The credit facility was used to finance certain letter of credit obligations and will provide improved working capital flexibility for FreightCar America. This new facility replaced the company’s prior $50 million revolving credit facility with BMO Harris Bank, which limited the company’s ability to invest in its expanding Mexico operations. The agreement has a term of three years and carries an interest rate equivalent to the base rate plus 3% per annum, but not less than 6.25%.
In addition to the new facility, FreightCar America also:
- Finalized early termination of the lease at the Cherokee, AL (Shoals) manufacturing facility effective Feb. 28, 2021
- Completed Association of American Railroads certification audits for a new joint venture facility in Castaños, Mexico and is now awaiting approval to start shipping railcars
- The Castaños facility completed its first car in early September and continues to ready itself for full production in 2021
“We are pleased to announce substantial progress in our recently announced plan to reposition FreightCar America to be a much stronger player in the railcar industry,” Jim Meyer, president and CEO of FreightCar America, said. “First, we have reached an agreement with the Shoals facility owner and landlord, the Retirement Systems of Alabama (RSA), to exit our lease as of the end of February 2021. We will exchange infrastructure-related equipment at the facility in consideration for the early termination of the lease. This agreement is consistent with our previous announcement and go forward planning. We will retain all tooling and other assets specific to manufacturing railcars, all of which will transfer to Castaños. Our agreement with the RSA solves the fundamental cost and capacity mismatch with Shoals and keeps us on track to reduce our fixed costs by approximately $20 million per year and to reduce our production breakeven to less than 2,000 cars per year when Castaños becomes fully operational.
“We are also providing updates on two other important steps related to our manufacturing repositioning. First, we secured new asset-based financing from Siena Lending Group. This financing replaced our former ABL facility with BMO Harris Bank N.A, and now provides us greater flexibility and the ability to complete the acquisition of the remaining 50% of our JV partnership. Second, the AAR audits were recently completed in Castaños and we are now awaiting final certification and approval to start shipping finished product.
“We are taking aggressive and proactive actions to reposition the business for enhanced long-term success. Castaños is not only the newest purpose-built railcar manufacturing facility in North America, but also has the flexibility to scale as market demand returns. When combined with our new and very experienced workforce at building railcars, we expect to achieve our goal of becoming the lowest cost, highest quality producer of railcars in the industry. We have more hard work to do before we realize these goals, but believe strongly in the strategy and the ability of our team to execute it.”
FreightCar America manufactures a range of railroad freight cars, supplies railcar parts and leases freight cars through its FreightCar America Leasing Company subsidiaries.