Summary
Howmet Aerospace Inc. (HWM) has filed an 8-K report detailing the fifth amendment to its Five-Year Revolving Credit Agreement, dated March 29, 2021. The primary focus of this amendment is to extend the 'Covenant Relief Period' through December 31, 2022. During this period, the company will operate under modified financial covenants, specifically a tiered approach to its Consolidated Net Debt to Consolidated EBITDA ratio, which is allowed to be higher than previously stipulated, ranging from 5.50:1.00 initially and gradually decreasing to 3.75:1.00 by the end of 2022. This amendment also introduces revised limitations on Liens and Subsidiary Indebtedness, and importantly, it prohibits Restricted Payments, including share repurchases and dividends, through the Covenant Relief Period. However, exceptions are made for permitted Restricted Payments if no loans are outstanding under the Credit Agreement, with specific annual limits provided for 2021 and 2022. Additionally, the definition of Consolidated Net Debt has been updated to permit netting of unrestricted cash and cash equivalents exceeding $300 million, offering some financial flexibility.
Key Highlights
- 1Extension of the Covenant Relief Period for financial covenants until December 31, 2022.
- 2Modified Consolidated Net Debt to Consolidated EBITDA ratio, with relaxed limits throughout the relief period.
- 3Limitations on Liens to secure borrowed money not to exceed $100,000,000.
- 4Restriction on Subsidiary Indebtedness, capped at $400,000,000 minus any outstanding Liens.
- 5Prohibition of Restricted Payments (dividends, share repurchases) during the Covenant Relief Period, with exceptions for outstanding loan-free periods.
- 6Amended definition of Consolidated Net Debt to include netting of unrestricted cash above $300,000,000.