Select Water Solutions, a provider of sustainable water and technology solutions to the energy industry, closed a new five-year senior secured sustainability-linked credit facility. The credit facility includes an initial $300 million revolving credit commitment and $250 million in term loan commitments. Both the revolver and term loan components feature a five-year tenor, providing the company with enhanced long-term financial stability to execute its strategic growth plans. The credit facility also provides the flexibility to expand by an additional $200 million through increased commitments from new or existing lenders over the next four years, including $150 million for additional revolver commitments and $50 million for additional term loan commitments.
As of the closing date of the credit facility, there were no borrowings outstanding under the revolver, approximately $20 million of letters of credit issued and outstanding thereunder and the term loan was fully funded. In connection with the entry into the credit facility, Select’s obligations under its previously amended and restated credit agreement, dated as of March 17, 2022 have been repaid in full and the previous credit facility was terminated on the closing date.
The credit facility incorporates two primary sustainability-linked targets, in a similar manner to the previous credit facility. The credit facility rewards Select with reduced borrowing costs for achieving measurable milestones in growing produced water recycling volumes and maintaining industry-leading safety standards, while also holding the company accountable with penalties for falling short of these benchmarks.
“This credit facility provides a significant opportunity to strengthen Select’s balance sheet and expand our overall liquidity while we continue to deliver on our strategic plans. The five-year tenor of this credit facility reinforces our financial stability and enhances our flexibility to expand our large-scale water infrastructure networks, advance our industry leading water recycling and automation technologies and drive sustainable and safe solutions for our customers. With more than $150 million of contracted infrastructure projects actively under construction providing a robust organic project backlog of increasingly contracted and production-levered revenues, we are well-positioned to deliver strong cash flows and returns for our shareholders over the coming years,” John Schmitz, chairman of the board, president and CEO of Select, said. “This credit facility supports our continued growth and allows us to deliver impactful solutions that conserve natural water resources, protect the environment and prioritize safety in the communities where we operate. With support from our shareholders, customers and financial partners, enhanced liquidity from our new credit facility and the strong cash conversion out of our base business segments, we are confident in our ability to execute on our strategic objectives.”
“This credit facility aligns with our strategy of pursuing accretive investments, underwritten by long-term contracts, while maintaining a conservative overall financial profile. With the enhanced liquidity from this credit facility in place through 2030, Select is poised to continue to scale its fast-growing water infrastructure segment, which has more than tripled its profitability over the last two years. Additionally, by introducing a term-loan component, we enhance our ability to fund transformative capital projects in our water infrastructure platform, supporting the development of long-term contracted revenue streams,” Chris George, executive vice president and chief financial officer of Select, said. “With nearly $400 million in pro forma liquidity, we are well positioned to deliver growth through both organic and acquisition opportunities. The sustainability-linked structure also highlights our unwavering commitment to environmental stewardship and safety excellence — core values that set Select apart as a trusted industry leader. Ultimately, this credit facility underscores the strong support Select enjoys from leading financial institutions, and I believe is a testament to the trust our banking partners place in our ability to drive long-term growth responsibly.”
The credit facility was led by Bank of America as lead arranger and agent, with JPMorgan Chase Bank, Bank OZK and MUFG Bank serving as joint lead arrangers and joint bookrunners. BofA Securities and J.P. Morgan Securities acted as joint sustainability structuring agents. Cadence Bank acted as an additional lender in the facility.
Vinson & Elkins acted as legal counsel to Select in connection with the credit facility. Winston & Strawn acted as legal counsel to Bank of America and the lender group.
