NN, a diversified industrial company, completed a new financing with J.P. Morgan, funds managed by Oaktree Capital Management and investment funds managed by Morgan Stanley Tactical Value to provide a $50 million asset-based credit line, a $150 million term loan and a $65 million preferred stock issuance, respectively.
NN will use proceeds from the transaction to repay the current principal balance of $70 million on its term loans due in 2022, to redeem its current $100 million outstanding preferred stock (prior to the increase in redemption premium at March 31, 2021) and to pay off its fixed interest rate swap of $14 million.
“We are pleased to complete this financing that provides NN with a solid foundation and flexibility to continue pursuing our strategic initiatives toward transformational growth,” Warren Veltman, president and CEO of NN, said. “We have positioned ourselves well to take advantage of the confluence of emerging vehicle electrification and the smart grid technologies necessary to power those vehicles. Supplemented by additional trends in aerospace and defense, we are confident these offerings will assist our efforts to drive future growth.”
The $50 million ABL revolving credit facility includes the following provisions:
- Interest rate of LIBOR plus 1.75% to 2%, with a 0.5% floor
- Term of five years
- Primarily secured by eligible receivables and inventory
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The $150 million term loan includes the following provisions:
- Interest rate of LIBOR plus 6.875%, with a 1% floor
- Term of 5.5 years
- Minimal financial covenants, including maximum total leverage ratio
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The $65 million preferred issuance includes the following provisions:
- Perpetual maturity, redeemable at the greater of accrued value or 1.4x the investment amount
- A 10% annual cash dividend (or 12% PIK) payable quarterly, with a 2.5% increase after year five
- Penny warrants to purchase 1.9 million common shares with a six-year expiration
- Board observer seat
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“With the reduction in leverage from the sale of Life Sciences in the fourth quarter, we sought to address the near-term debt maturities and outstanding preferred stock in a way that increased our ability to grow our business while maintaining an appropriate level of liquidity,” Tom DeByle, senior vice president and CFO of NN, said. “This new agreement meets these needs while bringing in investment partners that understand our industry and are committed to our long-term strategy.”
J.P. Morgan acted as administrative agent, sole bookrunner and sole lead arranger on the asset-based credit line, advised on the term loan and served as sole placement agent on the preferred issuance. Bass, Berry & Sims served as legal counsel to NN on the transaction. Gibson, Dunn & Crutcher served as legal counsel to Morgan Stanley Tactical Value.
