Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.7.0.1
Debt
6 Months Ended
Jun. 30, 2017
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]
Note 8 – Debt
 
Long-term debt consists of the following obligations as of:
 
 
 
Successor
 
 
 
June 30,
 
December 31,
 
(in thousands)
 
2017
 
2016
 
Credit Agreement – revolver (Successor)
 
$
-
 
$
-
 
Credit Agreement – term loan payable in quarterly installments of principal, plus interest through 2021
 
 
19,135
 
 
22,500
 
Casualty insurance premium financing
 
 
971
 
 
-
 
State of Ohio loan- payable in monthly installments of principal, plus interest at 3% through 2017
 
 
-
 
 
33
 
Capital leases – collateralized by vehicles, payable in monthly installments of principal, plus interest ranging from 4.9% to 5.3% through 2021
 
 
3,633
 
 
3,719
 
Total debt
 
 
23,739
 
 
26,252
 
Less - Current portion
 
 
(5,390)
 
 
(4,476)
 
Less - Debt issuance costs
 
 
(239)
 
 
(269)
 
Long-term debt
 
$
18,110
 
$
21,507
 
  
Successor
 
Senior Credit Facility
 
In conjunction with the completion of the Business Combination, all amounts outstanding under LHLLC’s prior senior credit facility were paid in full and a subsidiary of the Company, Limbach Facility Services LLC (“LFS”), entered into a new senior credit facility with multiple lenders (the “Credit Agreement”). The new senior credit facility consists of a $25.0 million revolving line of credit and a $24.0 million term loan, both with a maturity date of July 20, 2021. It is collateralized by substantially all assets of LFS and its subsidiaries. Principal payments of $750,000 on the term loan are due quarterly commencing with the calendar quarter ended September 30, 2016, and ending with the calendar quarter ending June 30, 2018. Principal payments of $900,000 are due at the end of subsequent quarters through maturity of the loan, with any remaining amounts due at maturity. During June 2017, the Company voluntarily made an additional principal payment of $1,865,000 on its term loan. Outstanding borrowings on both the term loan and the revolving line of credit bear interest at either the Base Rate (as defined in the Credit Agreement) or LIBOR (as defined in the Credit Agreement), plus the applicable additional margin, payable monthly. At June 30, 2017, the interest rate in effect on the term loan was 4.80%.
 
The Credit Agreement includes restrictions on, among other things and subject to certain exceptions, the Company and its subsidiaries’ ability to incur additional indebtedness, pay dividends or make other distributions, redeem or purchase capital stock, make investments and loans and enter into certain transactions, including selling assets, engaging in mergers or acquisitions and entering into transactions with affiliates.
 
The Credit Agreement requires that the Company comply with certain financial performance covenants including total leverage, senior leverage, fixed charges and tangible net worth. As of June 30, 2017, the Company was in compliance with these covenants under the Credit Agreement. Mandatory prepayments are required upon the occurrence of certain events, including, among other things and subject to certain exceptions, equity issuances, changes of control of the Company, certain debt issuances, assets sales and excess cash flow. Commencing with the fiscal year ending December 31, 2017, the Company will be required to remit an amount equal to 50% of its excess cash flow (as defined in the Credit Agreement), which percentage will be reduced based on the Senior Leverage Ratio (as defined therein). The Company may voluntarily prepay the loans at any time subject to the limitations set forth in the Credit Agreement.  
 
The equity interests of the Company’s subsidiaries have been pledged as security for the obligations under the Credit Agreement. The Credit Agreement includes customary events of default, including, among other items, payment defaults, cross-defaults to other indebtedness, a change of control default and events of default with respect to certain material agreements. Additionally, with respect to the Company, an event of default occurs if the Company’s securities cease to be registered with the SEC pursuant to Section 12(b) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). In case of an event of default, the administrative agent would be entitled to, among other things, accelerated payment of amounts due under the new senior credit facility, foreclose on the equity of the Company’s subsidiaries, and exercise all rights of a secured creditor on behalf of the lenders.
 
The additional margin applied to both the revolver and term loan is determined based on levels achieved under the Company’s Senior Leverage Ratio covenant, which reflects the ratio of indebtedness divided by EBITDA for the most recently ended four quarters.
 
The following is a summary of the additional margin and commitment fees payable on the available revolving credit commitment:
 
 
 
 
 
Additional Margin for
 
 
Additional Margin for
 
 
 
 
Level
 
Senior Leverage Ratio
 
Base Rate loans
 
 
Libor Rate loans
 
 
Commitment Fee
 
I
 
Greater than or equal to 2.50 to  1.00
 
 
3.00
%
 
 
4.00
%
 
 
0.50
%
II
 
Less than 2.50 to 1.00, but greater than or equal to 2.00 to 1.00
 
 
2.75
%
 
 
3.75
%
 
 
0.50
%
III
 
Less than 2.00 to 1.00, but greater than or equal to 1.50 to 1.00
 
 
2.50
%
 
 
3.50
%
 
 
0.50
%
IV
 
Less than 1.50 to 1.00
 
 
2.25
%
 
 
3.25
%
 
 
0.50
%
 
During the six months ended June 30, 2017, the Company drew down and repaid a total of $44.6 million on its revolving credit facility. The Company had $20.8 million of availability under its revolving credit facility at June 30, 2017.
 
Subordinated Debt
 
In conjunction with the completion of the Business Combination, the Company’s prior subordinated debt was paid in full and LFS entered into a new subordinated debt agreement. The new subordinated debt agreement consisted of a $13.0 million loan with a maturity date of July 20, 2022 (the “Subordinated Loan”). Principal payments were not required prior to maturity. Outstanding borrowings bore interest at 16.0%, with 13.0% payable quarterly in cash, and the Company had the option either to pay the remaining 3.0% in cash or have it deferred and capitalized into the Subordinated Loan balance.  On December 21, 2016, the Company repaid all amounts outstanding under the Subordinated Loan Agreement in full settlement thereof, including deferred interest and prepayment penalties, totaling $15.3 million, with the proceeds of the Company’s public offering of 1,405,500 shares of its common stock at a price of $13.50 per share. 
 
Predecessor
 
Senior Credit Facility
 
The Predecessor had a senior credit facility with a single lender. The revolving credit facility permitted borrowings up to $30.0 million. In January 2016, the credit facility was increased to $35.0 million and the maturity date was extended to May 2018. It was collateralized by substantially all of the Company’s assets except for real property. The credit facility contained certain restrictive covenants, which, among other things, required the Company to maintain certain financial ratios. The credit facility also contained cross-default provisions related to the subordinated debt facility and the underwriting agreement with the Company’s surety. In January 2016, the term loan was converted into a “draw term” loan facility and the amount of the facility was increased to $7.5 million, of which $5.5 million was available to be drawn in increments not to exceed $2.0 million.
 
A commitment fee was payable on the average daily unused amount of the senior credit facility. The fee was 0.4% of the unused amount.