Summary
Carpenter Technology Corporation (CRS) announced on February 15, 2022, an amendment to its secured revolving credit facility, primarily impacting its financial covenants. The amendment delays the testing dates for the interest coverage ratio and adjusts the required ratios upwards over the next few fiscal quarters, starting with a 2.00 to 1.00 ratio for the June 30, 2022 test date. It also modifies the minimum available liquidity covenant and the restricted period, which limits secured debt, dividends, and certain investments.
Key Highlights
- 1Amendment to secured revolving credit facility entered into on February 14, 2022.
- 2Interest coverage ratio covenant testing dates are revised, starting June 30, 2022.
- 3Required minimum interest coverage ratio increases from 2.00 to 1.00 to 3.50 to 1.00 by December 31, 2022.
- 4Minimum available liquidity covenant is tied to the later of June 30, 2022, or the first interest coverage ratio test date with a 2.00:1.00 ratio.
- 5Restricted period, which limits secured debt and dividends, will expire on the later of September 30, 2022, or the first interest coverage ratio test date with a 3.50:1.00 ratio.
- 6The amendment provides the company with flexibility regarding its debt obligations and capital allocation in the near term.
Frequently Asked Questions
The main purpose of this 8-K filing is to announce an amendment to Carpenter Technology Corporation's secured revolving credit facility, which modifies key financial covenants related to interest coverage, liquidity, and restrictions on debt and distributions.
The testing of the interest coverage ratio is postponed, with the first test date set for June 30, 2022. The required minimum ratio will gradually increase from 2.00 to 1.00 as of June 30, 2022, to 3.00 to 1.00 by September 30, 2022, and finally to 3.50 to 1.00 by December 31, 2022, and thereafter.
The amendment adjusts the conditions under which the company must maintain liquidity and also revises the "restricted period." This restricted period, which limits the ability to incur secured debt (other than for new equipment financing) and restricts dividends or certain investments, will now expire later, depending on when the company meets the higher interest coverage ratios.
The restricted period is scheduled to expire on the later of September 30, 2022, or the first test date on which Carpenter Technology Corporation's interest coverage ratio is at least 3.50 to 1.00.