Armtec Infrastructure Inc. Announces Availability of Covenant Relief and New Short-Term Credit Facility
CONCORD, ON, June 11, 2014 /CNW/ - Armtec Infrastructure Inc. ("Armtec" or the "Company") (TSX: ARF; ARF.DB) announced today that it has achieved its Senior Secured Debt to EBITDA covenant under its term facility (the "Term Facility") with Brookfield Capital Partners Fund III LP ("Brookfield") (the "Covenant") as at May 31, 2014 and that it has entered into a memorandum of understanding with Brookfield in connection with amending the Term Facility (the "Amendment").
Armtec previously disclosed that its performance during the first half of 2014 is expected to put pressure on its near-term liquidity position and the Covenant. Accordingly, the Company has been reviewing alternatives in order to deliver the most economical solution to address both its liquidity tightness and Covenant concerns.
The Covenant currently requires Armtec to maintain a Senior Secured Debt to EBITDA ratio of no greater than 5.25:1 (the "Ratio"). The Amendment will provide Armtec with a waiver of the Covenant in the event that such relief is required (the "Covenant Waiver"). The Covenant Waiver will be in effect until July 15, 2014 and may be extended to September 30, 2014, at Armtec's option, prior to July 15, 2014. If the Covenant Waiver is exercised, the Covenant calculations would recommence on October 31, 2014.
The Amendment will also make available to Armtec a short-term credit facility in the principal amount of up to $7.5 million, at an interest rate equal to the 30-day Banker's Acceptance (BA) rate plus 12.0% (the "Short Term Facility"). The Short Term Facility will mature on September 19, 2014.
In the event that (i) Armtec exceeds the Ratio at June 30, 2014, (ii) Armtec elects to extend the Covenant Waiver by July 15, 2014 or (iii) Armtec elects to access the Short Term Facility, Armtec will be required to pay to Brookfield a waiver fee of $2 million and a standby fee of $250,000 for the Short Term Facility. In addition, a draw fee of $250,000 will be payable by Armtec should it use the Short Term Facility. Armtec has the option to defer payment of each of the waiver fee, standby fee and draw fee, in which case such amounts will be added to the principal of the Term Facility; however, these fees will be excluded from future Covenant calculations.
The Amendment remains subject to the parties entering into mutually acceptable definitive documentation. Armtec's revolving credit facility will also be amended to accommodate the Short Term Facility.
Armtec has agreed to publically disclose certain information that was provided to potential lenders in connection with the review of alternate solutions. Accordingly, at this time, Armtec anticipates its consolidated revenue, consolidated EBITDA, consolidated capital expenditure and consolidated secured debt for the balance of 2014 to be approximately as follows:
|Quarter Ending||Year Ending|
|(millions)||June 30||September 30||December 31|
Consolidated Secured Debt
(as calculated for covenant
These forecasts are based upon anticipated stronger revenue in the second half of 2014 in both the Drainage Solutions ("Drainage") and Precast Concrete Solutions ("Precast") Business Units. Improved demand for drainage products is expected to be supported by some recovery of the unfavourable installation conditions experienced in the first half of 2014, but this increase will be partially offset by softer international market activity. Despite the anticipated volume increase, Drainage continues to face competitive pricing pressures in Western Canada, which is expected to impact both revenue and EBITDA.
The stronger second-half demand anticipated for Precast is based on customer schedule delays from the first half of 2014 being resolved and increased demand in the Prairie and Soundwall market areas. These improvements are expected to be partially offset by the completion of the Kitimat smelter modernization project in the Pacific market area and the softness in the Ontario marketplace. Armtec's portion of the Kitimat smelter modernization project was announced in December of 2011 to supply precast components to expand and upgrade Rio Tinto Alcan's aluminum smelter in Kitimat, British Columbia.
About Armtec Infrastructure Inc.
Armtec is a manufacturer and marketer of a comprehensive range of infrastructure products and engineered construction solutions for customers in a diverse cross-section of industries that are located in every region of Canada, as well as in selected markets globally. These markets include Canada's national and regional public infrastructure markets and private sector markets in agricultural drainage, commercial building, residential construction and natural resources. Armtec operates through a network of offices and production facilities across the country. Armtec operates in two business units: Drainage Solutions manufactures and markets corrugated high-density polyethylene pipe, corrugated steel pipe and other drainage related products including small bridge structures. Precast Concrete Solutions manufactures and markets highly engineered precast systems such as parking garages, bridges, sport venues and building envelopes as well as standard precast products such as steps, paving stones and utility vaults. Armtec's common shares and convertible debentures trade on the Toronto Stock Exchange under the symbols "ARF" and "ARF.DB," respectively.
References to EBITDA are to earnings before finance (income) expense - net, income taxes, depreciation and amortization, certain non-recurring expenses and certain other non-cash amounts. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure of cash available prior to debt service, changes in working capital, capital expenditures and income taxes. However, EBITDA is not a recognized measure under GAAP. Investors are cautioned that EBITDA should not be construed as an alternative to net and comprehensive earnings determined in accordance with GAAP as an indicator of Armtec's performance or as an alternative to cash flows from operating, investing and financing activities as a measure of Armtec's liquidity and cash flows. Armtec's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, Armtec's EBITDA may not be comparable to similarly named measures used by other issuers.
This news release contains "forward-looking" statements within the meaning of applicable securities legislation (including Armtec's projections for its consolidated revenue, consolidated EBITDA, consolidated capital expenditures and consolidated secured debt for the balance of 2014), which involve known and unknown risks, uncertainties and other factors which may cause the actual results or events to be materially different from any future results or events expressed or implied by such forward-looking statements. Forward-looking statements typically contain such words or phrases as "proposed", "may", "outlook", "objective", "intend", "estimate", "anticipate", "should", "could", "would", "will", "expect", "believe", "plan" and other similar terminology suggesting future outcomes or events. Forward-looking statements reflect current expectations regarding future results, events, performance and achievements and are based on information currently available to Armtec's management, anticipated operating and financial results of Armtec, and current and anticipated market conditions.
Forward-looking statements involve numerous assumptions and should not be read as guarantees of future results, events, performance or achievements. Such statements will not necessarily be accurate indications of whether or not such future results, events, performance or achievements will be achieved. You should not unduly rely on forward-looking statements as a number of factors, many of which are beyond the control of Armtec, could cause actual results, events, performance or achievements to differ materially from the results, events, performance or achievements discussed in the forward-looking statements, including, but not limited to the factors discussed in Armtec's materials filed with the Canadian securities regulatory authorities from time to time. Although the forward-looking statements contained in this news release are based upon what management of Armtec believes are reasonable assumptions, Armtec cannot assure investors that actual results, events, performance or achievements will be consistent with these forward-looking statements. All forward-looking statements in this news release are qualified by these cautionary statements. These forward-looking statements are made as of the date of this news release and, except as required by applicable law, Armtec assumes no obligation to update or revise them to reflect new events or circumstances.
SOURCE Armtec Infrastructure Inc.For further information:
Vice President & Corporate Secretary
Armtec Infrastructure Inc. Tel: (647) 795-9290