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Item 1.01.
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Entry into a Material Definitive Agreement.
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Amended Credit Agreement
On May 11, 2015, Babcock & Wilcox Enterprises, Inc. (“we” or the “Company”) entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent and lender, and the other lenders party thereto in connection with its spin-off from The Babcock & Wilcox Company (now known as BWX Technologies, Inc.).
The Credit Agreement, which is scheduled to mature on June 30, 2020, provides for a senior secured revolving credit facility, initially in an aggregate amount of up to $600.0 million. The proceeds from loans under the Credit Agreement are available for working capital needs and other general corporate purposes, and the full amount is available to support the issuance of letters of credit, subject to specified limits.
Since June 2016, we have entered into a number of amendments to the Credit Agreement. On October 31, 2018, we entered into a further amendment to the Credit Agreement (the “Amendment," and the Credit Agreement, as amended to date, the “Amended Credit Agreement”) to, among other things, provide for the following modifications: (1) modify the definition of adjusted EBITDA in the Amended Credit Agreement to exclude up to an additional (i) $25.0 million of charges for certain renewable loss contracts and (ii) $5.0 million of charges related to SPIG S.p.A. and its subsidiaries, for periods including the quarter ended September 30, 2018, and to allow such add backs to EBITDA for periods including the quarter ending December 31, 2018, to the extent not already utilized; (2)
modify the minimum liquidity amount we are required to hold as a condition to borrowing both at the time of any credit extension request and on the proposed date of the credit extension (as defined in the Amended Credit Agreement) to be at least $45.0 million (or $40.0 million upon the turnover of certain renewable projects), after giving pro forma effect to the application of proceeds of the intended use of such borrowing; (3)
lower the amount of certain excess cash we can retain prior to being required to repay (without any reduction in commitments) outstanding borrowings under the Amended Credit Agreement from $50.0 million to $45.0 million; (4) modify certain contract completion milestones that we are required to meet in connection with six renewable energy projects; (5) require us to achieve certain concessions from certain of our renewable loss contract customers by February 15, 2019 that will generate at least $25.0 million of incremental benefits to us; and (6) modify the financial covenants as described below.
The Amendment also modified certain financial covenants included in the Amended Credit Agreement that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted senior debt leverage ratio as defined in the Amended Credit Agreement is:
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9.75:1.0 for the quarter ended September 30, 2018;
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9.00:1.0 for the quarter ending December 31, 2018;
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4.00:1.0 for the quarter ending March 31, 2019;
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3.50:1.0 for the quarter ending June 30, 2019;
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3.00:1.0 for the quarter ending September 30, 2019; and
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3.00:1.0 for the quarter ending December 31, 2019 and each quarter thereafter.
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The minimum consolidated interest coverage ratio as defined in the Amended Credit Agreement is:
• 1.0:1.0 for the quarter ended September 30, 2018;
• 1.0:1.0 for the quarter ending December 31, 2018;
• 2.25:1.0 for the quarter ending March 31, 2019;
• 3.0:1.0 for the quarter ending June 30, 2019;
• 3.25:1.0 for the quarter ending September 30, 2019; and
• 3.25:1.0 for the quarter ending December 31, 2019 and each quarter thereafter.
Certain of the lenders, as well as certain of their respective affiliates, have performed and may in the future perform for the Company and its subsidiaries, various commercial banking, investment banking, lending, underwriting, trust services, financial advisory and other financial services, for which they have received and may in the future receive customary fees and expenses.
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Item 2.03.
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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The information described in Item 1.01 above relating to the Amendment is incorporated herein by reference into this Item 2.03.