Black Diamond Group Limited (“Black Diamond” or “the Company”)
(TSX: BDI) announced today that the Company has agreed to terms
with respect to a four-year secured asset-based revolving credit
facility (“Facility”). The Facility is expected to close within the
next week and is subject to customary closing conditions. The
lending syndicate for the Facility is co-lead by The Bank of Nova
Scotia and Bank of Montreal with a maximum $200 million revolving
line, plus an uncommitted $50 million accordion.
The Facility will replace the Company’s current
debt which, as at June 30, 2019 consisted of $44 million of
privately placed Senior Secured Notes and a $100 million credit
facility, of which $50 million was drawn. Based on current market
rates and the Company’s financial position, Black Diamond expects
effective annual interest rate savings in the range of 150 to 200
basis points, excluding any one-time costs. The borrowing base, or
available amount at any given time under the Facility is based on
85 - 90% of the Net Orderly Liquidation Value (“NOLV”) of eligible
rental fleet and qualified receivables, up to $200 million. The
borrowing base at close will be $172 million, representing
available liquidity or excess capacity under the Facility at
approximately $80 million.
With respect to financial covenants, the Company
will be required to maintain a Fixed Charge Coverage Ratio (“FCCR”)
of 1.1 to 1; however, this covenant is only tested in certain
instances, such as when draws under the Facility exceed 90% of the
borrowing base.
As part of the Facility setup process, an
independent third-party appraisal of the Company’s U.S. and
Canadian Modular Space Solutions (“MSS”) and U.S. Energy Services
assets was commissioned. These assets were appraised with a NOLV of
slightly above $180 million, which is approximately equal to the
current net book value of these assets on the Company’s balance
sheet. The appraised assets account for approximately half of Black
Diamond’s capital assets by net book value.
"With a committed facility through to October 2023,
we are taking advantage of our strong financial position to
increase our liquidity, while reducing interest costs,” said Toby
LaBrie, Chief Financial Officer for Black Diamond. "By leveraging
the intrinsic value of our high-quality fleet of assets, this type
of financing is a highly flexible and cost-effective method to
support the growth of our diversified MSS business."
The Company’s 2019 gross capital plan of $35
million is unchanged, with approximately $25 to $30 million
projected for growth in MSS. In the first half of 2019, the Company
grew the MSS fleet by 5.4% or 313 net rental units and we continue
to work towards our objective of growing the fleet by approximately
10% per year over the next several years. The Company’s capital
plan is expected to continue to be substantially funded from
internally generated cash flow. Accordingly, the Company continues
to expect its balance sheet to be conservatively capitalized, with
a meaningful amount of asset coverage provided by marketable fleet
and receivables. As a percentage of the Company’s net book value of
fleet assets (“NBV”), the fully committed facility represents 60%
of NBV, while the current debt outstanding represents 28% of NBV.
While there is no specific debt to trailing EBITDA covenant within
the Facility agreement, Management believes that a ratio with a
long-term range of 2.0x to 3.0x is prudent, sustainable and
compares conservatively with specialty rental company peer group
ranges.
“The new Facility will allow Black Diamond to
consider organic growth projects as well as small tuck-in
acquisitions,” commented Trevor Haynes, Black Diamond’s CEO. “We
are fully committed to deliver balanced and profitable growth while
continuing to diversify our platform. As a result of our geographic
and product diversification efforts, approximately 60% to 70% of
the Company’s consolidated revenue was generated from outside of
the western Canadian energy sector in 2018 and through the first
half of 2019. We believe the Facility represents a significant
milestone in Black Diamond’s continued evolution and is a key
component in delivering on the Company’s long-range vision and
strategy.”
About Black Diamond Group
Black Diamond is a specialty rentals and industrial
services Company with two operating business units - Modular Space
Solutions (MSS) and Workforce Solutions (WFS). We operate in
Canada, the United States, and Australia. MSS through its principal
brands, BOXX Modular, Britco, and MPA, owns a large rental fleet of
modular buildings of various types and sizes. Its network of local
branches rent, sell, service, and provide ancillary products and
services to a diverse customer base in the construction,
industrial, education, financial, and government sectors. WFS
through its principal brands, Black Diamond Camps and Black Diamond
Energy Services, owns a large rental fleet of modular accommodation
assets of all types and sizes and a fleet of liquid and solid
containment assets. Its regional operating terminals rent, sell,
service, and provide ancillary products and services including
turn-key operated camps to a wide array of customers in the
resource, infrastructure, construction, disaster recovery, and
education sectors. The WFS business unit also includes the
Company’s wholly owned subsidiary, LodgeLink, which operates a
digital marketplace for business-to-business crew accommodation,
travel, and logistics in North America.
Learn more at www.blackdiamondgroup.com.
For investor inquiries, please contact Jason Zhang
at 403-206-4739 or investor@blackdiamondgroup.com
To sign up for news alerts please go to
https://www.blackdiamondgroup.com/investor-centre/news-alerts-subscription/.
Forward-Looking Statements
Certain information set forth in this news release
contains forward-looking statements including, but not limited to,
timing of closing of the transaction, the amount of funds that will
be expended on the 2019 capital plan, how such capital will be
expended, anticipated debt levels, the size of the Company’s
borrowing base and resulting liquidity under the Facility,
management's assessment of Black Diamond's future operations and
what may have an impact on them, financial performance, business
prospects and opportunities, changing operating environment
including increased activity levels, amount of revenue anticipated
to be derived from current contracts, economic life of the
Company's assets, future growth and profitability of the Company
and realization of the anticipated benefits of acquisitions and
sales. With respect to the forward-looking statements in the news
release, Black Diamond has made assumptions regarding, among other
things: future commodity prices, that Black Diamond will continue
to conduct its operations in a manner consistent with past
operations, that counter-parties to contracts will perform the
contracts as written and that there will be no unforeseen material
delays in contracted projects. Although Black Diamond believes that
the expectations reflected in the forward-looking statements
contained in this news release, and the assumptions on which such
forward-looking statements are made, are reasonable, there can be
no assurances that such expectations or assumptions will prove to
be correct. Readers are cautioned that assumptions used in the
preparation of such statements may prove to be incorrect. Events or
circumstances may cause actual results to differ materially from
those predicted, as a result of numerous known and unknown risks,
uncertainties and other factors, many of which are beyond the
control of Black Diamond. These risks include, but are not limited
to: the impact of general economic conditions, industry conditions,
fluctuation of commodity prices, the Company's ability to attract
new customers, failure of counterparties to perform on contracts,
industry competition, availability of qualified personnel and
management, timely and cost effective access to sufficient capital
from internal and external sources, political conditions,
dependence on suppliers and stock market volatility. The risks
outlined above should not be construed as exhaustive. Additional
information on these and other factors that could affect Black
Diamond's operations and financial results are included in Black
Diamond's annual information form for the year ended December 31,
2018 and other reports on file with the Canadian Securities
Regulatory Authorities which can be accessed on SEDAR. Readers are
cautioned not to place undue reliance on these forward-looking
statements. Furthermore, the forward-looking statements contained
in this news release are made as at the date of this news release
and Black Diamond does not undertake any obligation to update or
revise any of the forward-looking statements, except as may be
required by applicable securities laws.
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