Building Materials Holdings Corp. (BMHC) announced Tuesday it had amended the terms of $540 million worth of credit that raise BMHC's interest payments, restrict its ability to operate, and provide warrants that entitle the lenders to buy up to 8.75% of the company's shares.
The credit consists of a $200 million revolving credit loan and a $340 million term loan maturing in November 2011. BMHC has used roughly $329 million of the term loan and $29 million of the revolving credit line. The company agreed to pay interest rates that were increased to LIBOR (London Interbank Offered Rate) plus 5.25 percentage points or the prime rate plus 3.25 points. The minimum LIBOR interest is 3%.
The loan terms also include a number of restrictions. Among them:
- BMHC cannot borrow under the revolving terms an amount that's bigger than 70% of certain accounts receivable, 50% of certain inventory, 25% of certain other inventory, approximately 75% of the appraised value of certain property and equipment and 50% of the appraised value of real estate. As of Sept. 30, BMHC said, its borrowing base available under the revolver was greater than $200 million.
- The lenders get warrants entitling them to buy roughly 2.8 million shares of BMHC stock--roughly 8.75% of the shares currently outstanding--at the Sept. 30 closing price of 47 cents per share. The entitlement ends in September 2015.
- At least through 2010, BMHC must meet a monthly minimum liquidity test and a test of its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
- Proceeds from certain dispositions, income tax refunds and cash in excess of $25 million must be be applied to the revolving loan. Also, starting next year, 75% of excess cash flow as defined in the agreement must be used to pay the term note.
- As before, the loan terms restrict BMHC's ability to take on more debt, pay dividends, buy shares, enter into mergers or acquisitions, make capital expenditures and sell assets.
On Aug. 14, BMHC reported a net loss of $31.9 million for the second quarter. That's a 6% improvement from the first quarter but a swing from the $19.4 million profit reported in the April-June period of 2007. Sales decreased 41% from the year-earlier period to $385 million.
During a conference call with analysts after posting its results Aug. 14, BMHC said its employee head count has fallen from 25,000 in July 2006 to roughly 11,000 as of this June. Operations have been consolidated into six regions, and the company is focusing more on millwork and truss projects. BMHC also sold its Phoenix windows operation and is winding down its HVAC operations in Arizona and Nevada, its trim operations in Nevada, and its plumbing operations in Nevada and Southern California. In addition, it is auctioning off some vehicles.
BMHC, the fifth-biggest company on the 2008 ProSales 100, is much more closely tied to production builders than other pro-oriented dealers.