December 29, 2022: (TSX: NFI, OTC:
NFYEF, TSX: NFI.DB) NFI Group Inc. (“NFI” or the
“Company”), a leading independent bus and coach manufacturer and a
leader in electric mass mobility solutions, today announced that it
has completed the amendments to the Company’s existing senior
revolving credit facility (the “Revolver”) and its revolving UK
credit facility (the “UK Facility” and collectively with the
Revolver, the “Facilities”) referred to in the Company’s news
release of December 23, 2022.
Details are as follows:
- Amendments provide relief from previous key financial covenants
(Total Leverage Ratio1 (“TLR”), Minimum Adjusted EBITDA2 and
Interest Coverage Ratio3 (“ICR”)) for the fourth quarter of 2022
and the first two quarters of 2023 – the period ending June 30,
2023 (the “Waiver Period”).
- During the Waiver Period, the Company is subject to a Total Net
Debt to Capitalization (“TNDC”) ratio, starting in January 2023,
and a minimum Adjusted EBITDA2 covenant starting in March 2023.
Additional details provided below.
- Under the amendments, NFI has lowered the Revolver capacity
from $1.25 billion to $1.0 billion, and the UK Facility from £50
million to £40 million. The Revolver now has a $25 million minimum
liquidity requirement, which was previously $250 million.
- The Revolver matures on August 2, 2024 (“Maturity Date”), and,
through the amendments, the UK Facility now matures on June 30,
2023 (was previously May 1, 2023).
- NFI and its banking syndicate partners are now focused on
developing new longer-term credit arrangements, and NFI will be
seeking agreements that provide appropriate capacity and covenants
matched to the Company’s anticipated financial performance and
recovery. The Company is targeting completion of these changes
prior to the end of the Waiver Period.
In addition to today’s amendments, NFI also
expects it will finalize agreements in January 2023 for the
Government of Manitoba’s proposed CAD$50 million debt facility, to
support investments in working capital and general corporate
purposes, and Export Development Canada’s (“EDC”) credit facilities
of up to $150 million to support supply chain financing ($50
million) and surety and performance bonding requirements for new
contracts (up to $100 million).
_________________________________
1 Total Leverage Ratio (“TLR”) calculation is
provided under “NFI Credit Agreement Amended Covenants.” 2 See
Non-IFRS measures. 3 Interest Coverage Ratio (“ICR”) calculation is
provided under “NFI Credit Agreement Amended Covenants.”
NFI Credit Agreement Amended
Covenants
NFI partnered with banking syndicate members to
implement covenants during the Waiver Period that are based on a
financial model that utilizes a conservative downside projection as
compared to NFI’s internal financial objectives. NFI anticipates
that it will be able to comply with the covenants that are in place
during the Waiver Period. Following the Waiver Period, certain
waived covenants would resume as per the fifth amended credit
agreement, completed on July 29, 2022, unless NFI has entered into
new credit agreements. Details are provided in the table below:
Quarter and Months |
Total Net Debt to
Capitalization1 |
Minimum Adjusted
EBITDA2(cumulative
calculation) |
Minimum Liquidity3 |
Total Leverage Ratio4 |
Interest Coverage Ratio5 |
2022 Q4 |
Waived |
Waived |
$25 million |
Waived |
Waived |
January 2023 |
<0.62:1.00 |
n/a |
$25 million |
Waived |
Waived |
February 2023 |
<0.62:1.00 |
n/a |
$25 million |
Waived |
Waived |
March 2023 |
<0.62:1.00 |
> ($28) million |
$25 million |
Waived |
Waived |
April 2023 |
<0.62:1.00 |
> ($31) million |
$25 million |
Waived |
Waived |
May 2023 |
<0.62:1.00 |
> ($35) million |
$25 million |
Waived |
Waived |
June 2023 |
<0.62:1.00 |
> ($35) million |
$25 million |
Waived |
Waived |
2023 Q3 |
n/a |
n/a |
$25 million |
<4.50x |
>2.00x |
2023 Q4 |
n/a |
n/a |
$25 million |
<4.00x |
>2.50x |
2024 Q1 and Thereafter |
n/a |
n/a |
$25 million |
<3.75x |
>3.00x |
1) TNDC is calculated as borrowings on the
Facilities, less unrestricted cash and cash equivalents, divided by
Shareholder’s Equity, as shown on the Company’s balance sheet, plus
borrowings on the Facilities. The TNDC covenant excludes the impact
of any actual goodwill write-downs up to a maximum of $100
million.
2) The Minimum Adjusted EBITDA covenant is
first tested at the end of March 31, 2023, but includes results
from the period January 1, 2023 to March 31, 2023. The covenant
continues on a cumulative basis for April, May and June 2023 with
all periods starting January 1, 2023. The Minimum Adjusted EBITDA
tests are based on calendar month-end dates.
3) Liquidity is calculated as unrestricted
cash and cash equivalents plus the aggregate amount of credit
available under the Facilities.
4) TLR is calculated as aggregate
indebtedness of the Company not including the Company’s 5.0%
convertible debentures and certain non-financial products, less
unrestricted cash and cash equivalents up to a maximum of $50
million, divided by Adjusted EBITDA, typically calculated on a
trailing twelve-month basis. When the TLR is reintroduced in 2023
Q3, Adjusted EBITDA will be based on a trailing twelve-month
basis.
5) ICR is calculated as the same trailing
twelve month Adjusted EBITDA as the TLR divided by trailing
twelve-month interest expense on the Facilities, the Company’s 5.0%
convertible debentures and other interest and bank charges.
Adjusted EBITDA and Liquidity are Non-IFRS
Measures. See notes on “Non-IFRS Measures” later in this press
release for details.
In addition to the revised covenants, during the
Waiver Period NFI is also required to comply with certain other
reporting requirements and a borrowing base calculation, is not
permitted to pay any dividends or complete any acquisitions, and
capital expenditures cannot exceed $50 million per annum.
Copies of the amendments to the Revolver, which
will include additional details regarding the covenants and other
terms and conditions, will be posted on SEDAR in due course.
The Bank of Nova Scotia is the Administrative
Agent for the Revolver, and The Bank of Nova Scotia, BMO Capital
Markets, and National Bank Financial Inc. are the Joint
Bookrunners. The Revolver syndicate also includes The Canadian
Imperial Bank of Commerce; Bank of America, Canada Branch; Wells
Fargo Bank, N.A., Canadian Branch; The Toronto Dominion Bank; HSBC
Bank Canada; MUFG Bank Ltd., Canada Branch; Export Development
Canada and ICICI Bank Canada.
For the UK Facility, HSBC UK acts as
Administrative Agent and HSBC UK and the Bank of America, Canada
Branch are the two co-lenders and Mandated Lead Arrangers.
About NFI
Leveraging 450 years of combined experience, NFI
is leading the electrification of mass mobility around the world.
With zero-emission buses and coaches, infrastructure, and
technology, NFI meets today’s urban demands for scalable smart
mobility solutions. Together, NFI is enabling more livable cities
through connected, clean, and sustainable transportation.
With 7,500 team members in nine countries, NFI
is a leading global bus manufacturer of mass mobility solutions
under the brands New Flyer® (heavy-duty transit buses), MCI® (motor
coaches), Alexander Dennis Limited (single and double-deck buses),
Plaxton (motor coaches), ARBOC® (low-floor cutaway and medium-duty
buses), and NFI Parts™. NFI currently offers the widest range of
sustainable drive systems available, including zero-emission
electric (trolley, battery, and fuel cell), natural gas, electric
hybrid, and clean diesel. In total, NFI supports its installed base
of over 105,000 buses and coaches around the world. NFI’s common
shares (the “Shares”) trade on the Toronto Stock Exchange (“TSX”)
under the symbol NFI and its convertible unsecured debentures (the
“Debentures”) trade on the TSX under the symbol NFI.DB. News and
information is available at www.nfigroup.com, www.newflyer.com,
www.mcicoach.com, www.nfi.parts, www.alexander-dennis.com,
www.arbocsv.com, and www.carfaircomposites.com.
For media inquiries, please contact:Melanie
McCreathP: 204.224.6496Melanie.McCreath@nfigroup.com
For inquiries, please contact:Stephen KingP:
204.224.6382Stephen.King@nfigroup.com
Non-IFRS Measures
References to “Adjusted EBITDA” are to earnings
before interest, income taxes, depreciation and amortization after
adjusting for the effects of certain non-recurring and/or
non-operations related items and expenses incurred outside the
normal course of operations that do not reflect the current ongoing
cash operations of the Company. These adjustments include gains or
losses on disposal of property, plant and equipment, fair value
adjustment for total return swap, unrealized foreign exchange
losses or gains on non-current monetary items and forward foreign
exchange contracts, costs associated with assessing strategic and
corporate initiatives, past service costs and other pension costs
or recovery, non-operating costs or recoveries related to business
acquisition, fair value adjustment to acquired subsidiary company's
inventory and deferred revenue, proportion of the total return swap
realized, equity settled stock-based compensation, expenses
incurred outside the normal course of operations, recovery of
currency transactions, prior year sales tax provision, COVID-19
costs and impairment loss on goodwill and non-operating
restructuring costs.
Management believes Adjusted EBITDA is a useful
measure in evaluating the performance of the Company. However,
Adjusted EBITDA is not a recognized earnings or cash flow measure
under IFRS and does not have standardized meanings prescribed by
IFRS. Readers of this press release are cautioned that Adjusted
EBITDA should not be construed as an alternative to net earnings or
loss or cash flows from operating activities determined in
accordance with IFRS as an indicator of NFI’s performance. NFI's
method of calculating Adjusted EBITDA, may differ materially from
the methods used by other issuers and, accordingly, may not be
comparable to similarly titled measures used by other issuers.
"Liquidity" is not a recognized measure under
IFRS and does not have a standardized meaning prescribed by IFRS.
The Company defines liquidity as cash on-hand plus available
capacity under its credit facilities.
Forward-Looking Statements
This press release contains “forward-looking
information” and “forward-looking statements” within the meaning of
applicable Canadian securities laws, which reflect the expectations
of management regarding the Company’s future growth, financial
performance, and liquidity and objectives and the Company’s
strategic initiatives, plans, business prospects and opportunities,
including the duration, impact of and recovery from the COVID-19
pandemic, supply chain disruptions and plans to address them, and
regarding future amendments to the Company’s credit facilities. The
words “believes”, “views”, “anticipates”, “plans”, “expects”,
“intends”, “projects”, “forecasts”, “estimates”, “guidance”,
“goals”, “objectives” and “targets” and similar expressions of
future events or conditional verbs such as “may”, “will”, “should”,
“could”, “would” are intended to identify forward-looking
statements. These forward-looking statements reflect management’s
current expectations regarding future events (including the
temporary nature of the supply chain disruptions and operational
challenges, production improvement, the recovery of the Company’s
markets and the expected benefits to be obtained through its “NFI
Forward” initiative) the availability of financing and the
Company’s financial and operating performance and speak only as of
the date of this press release. By their very nature,
forward-looking statements require management to make assumptions
and involve significant risks and uncertainties, should not be read
as guarantees of future events, performance or results, and give
rise to the possibility that management’s predictions, forecasts,
projections, expectations or conclusions will not prove to be
accurate, that the assumptions may not be correct and that the
Company’s future growth, financial performance and objectives and
the Company’s strategic initiatives, plans, business prospects and
opportunities, including the Company’s plans and expectations
relating to the duration, impact of and recovery from the COVID-19
pandemic, supply chain disruptions and inflationary pressures, will
not occur or be achieved. There can be no assurance that NFI will
be able to satisfy the conditions subsequent required for the
amendments to the Facilities, including without limitation entry to
the facilities with EDC and the Government of Manitoba, or that the
Company will be successful in obtaining future amendments to its
credit facilities or that any other financing may be available.
There can also be no assurance that NFI will be able to comply with
covenants under its credit facilities.
A number of factors that may cause actual
results to differ materially from the results discussed in the
forward-looking statements include: the Company’s business,
operating results, financial condition and liquidity may be
materially adversely impacted by the ongoing COVID-19 pandemic and
related supply chain challenges, employee absenteeism and
inflationary effects; the Company’s business, operating results,
financial condition and liquidity may be materially adversely
impacted by the Russian invasion of Ukraine due to factors
including but not limited to further supply chain disruptions and
inflationary pressures; funding may not continue to be available to
the Company’s customers at current levels or at all, the Company’s
business is affected by economic factors and adverse developments
in economic conditions which could have an adverse effect on the
demand for the Company’s products and the results of its
operations; currency fluctuations could adversely affect the
Company’s financial results or competitive position; interest rates
could change substantially, materially impacting the Company’s
revenue and profitability; an active, liquid trading market for the
Shares and/or the Debentures may cease to exist, which may limit
the ability of securityholders to trade Shares and/or Debentures;
the market price for the Shares and/or the Debentures may be
volatile; if securities or industry analysts do not publish
research or reports about the Company and its business, if they
adversely change their recommendations regarding the Shares or if
the Company’s results of operations do not meet their expectations,
the Share price and trading volume could decline, in addition, if
securities or industry analysts publish inaccurate or unfavorable
research about the Company or its business, the Share price and
trading volume of the Shares could decline; competition in the
industry and entrance of new competitors; current requirements
under U.S. “Buy America” regulations may change and/or become more
onerous or suppliers’ “Buy America” content may change; failure of
the Company to comply with the U.S. Disadvantaged Business
Enterprise (“DBE”) program requirements or the failure to have its
DBE goals approved by the U.S. Federal Transit Administration;
absence of fixed term customer contracts, exercise of options and
customer suspension or termination for convenience; local content
bidding preferences in the United States may create a competitive
disadvantage; requirements under Canadian content policies may
change and/or become more onerous; the Company’s business may be
materially impacted by climate change matters, including risks
related to the transition to a lower-carbon economy; operational
risk resulting from inadequate or failed internal processes, people
and/or systems or from external events, including fiduciary
breaches, regulatory compliance failures, legal disputes, business
disruption, pandemics, floods, technology failures, processing
errors, business integration, damage to physical assets, employee
safety and insurance coverage; international operations subject the
Company to additional risks and costs and may cause profitability
to decline; compliance with international trade regulations,
tariffs and duties; dependence on unique or limited sources of
supply (such as engines, components containing microprocessors or,
in other cases, for example, the supply of transmissions, batteries
for battery-electric buses, axles or structural steel tubing)
resulting in the Company’s raw materials and components not being
readily available from alternative sources of supply, being
available only in limited supply, a particular component may be
specified by a customer, the Company’s products have been
engineered or designed with a component unique to one supplier or a
supplier may have limited or no supply of such raw materials or
components or sells such raw materials or components to the Company
on less than favorable commercial terms; the Company’s vehicles and
certain other products contain electronics, microprocessors control
modules, and other computer chips, for which there has been a surge
in demand, resulting in a worldwide supply shortage of such chips
in the transportation industry, and a shortage or disruption of the
supply of such microchips could materially disrupt the Company’s
operations and its ability to deliver products to customers;
dependence on supply of engines that comply with emission
regulations; a disruption, termination or alteration of the supply
of vehicle chassis or other critical components from third-party
suppliers could materially adversely affect the sales of certain of
the Company’s products; the Company’s profitability can be
adversely affected by increases in raw material and component
costs; the Company may incur material losses and costs as a result
of product warranty costs, recalls and remediation of transit buses
and motor coaches; production delays may result in liquidated
damages under the Company’s contracts with its customers;
catastrophic events, including those related to impacts of climate
change, may lead to production curtailments or shutdowns; the
Company may not be able to successfully renegotiate collective
bargaining agreements when they expire and may be adversely
affected by labor disruptions and shortages of labor; the Company’s
operations are subject to risks and hazards that may result in
monetary losses and liabilities not covered by insurance or which
exceed its insurance coverage; the Company may be adversely
affected by rising insurance costs; the Company may not be able to
maintain performance bonds or letters of credit required by its
contracts or obtain performance bonds and letters of credit
required for new contracts; the Company is subject to litigation in
the ordinary course of business and may incur material losses and
costs as a result of product liability and other claims; the
Company may have difficulty selling pre-owned coaches and realizing
expected resale values; the Company may incur costs in connection
with regulations relating to axle weight restrictions and vehicle
lengths; the Company may be subject to claims and liabilities under
environmental, health and safety laws; dependence on management
information systems and cyber security risks; the Company’s ability
to execute its strategy and conduct operations is dependent upon
its ability to attract, train and retain qualified personnel,
including its ability to retain and attract executives, senior
management and key employees; the Company may be exposed to
liabilities under applicable anti-corruption laws and any
determination that it violated these laws could have a material
adverse effect on its business; the Company’s risk management
policies and procedures may not be fully effective in achieving
their intended purposes; internal controls over financial
reporting, no matter how well designed, have inherent limitations;
there are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls and
procedures; ability to successfully execute strategic plans and
maintain profitability; development of competitive or disruptive
products, services or technology; development and testing of new
products or model variants; acquisition risk; reliance on
third-party manufacturers; third-party distribution/dealer
agreements; availability to the Company of future financing; the
Company may not be able to generate the necessary amount of cash to
service its existing debt, which may require the Company to
refinance its debt; the Company’s substantial consolidated
indebtedness could negatively impact the business; the restrictive
covenants in the Company’s credit facilities could impact the
Company’s business and affect its ability to pursue its business
strategies; payment of dividends is not guaranteed; a significant
amount of the Company’s cash is distributed, which may restrict
potential growth; the Company is dependent on its subsidiaries for
all cash available for distributions; the Company may not be able
to make principal payments on the Debentures; redemption by the
Company of the Debentures for Shares will result in dilution to
holders of Shares; Debentures may be redeemed by the Company prior
to maturity; the Company may not be able to repurchase the
Debentures upon a change of control as required by the trust
indenture under which the Debentures were issued (the “Indenture”);
conversion of the Debentures following certain transactions could
lessen or eliminate the value of the conversion privilege
associated with the Debentures; future sales or the possibility of
future sales of a substantial number of Shares or Debentures may
impact the price of the Shares and/or the Debentures and could
result in dilution; payments to holders of the Debentures are
subordinated in right of payment to existing and future Senior
Indebtedness (as described under the Indenture) and will depend on
the financial health of the Company and its creditworthiness; if
the Company is required to write down goodwill or other intangible
assets, its financial condition and operating results would be
negatively affected; and income and other tax risk resulting from
the complexity of the Company’s businesses and operations and the
income and other tax interpretations, legislation and regulations
pertaining to the Company’s activities being subject to continual
change.
Factors relating to the global COVID-19 pandemic
include: the magnitude and duration of the global, national and
regional economic and social disruption being caused as a result of
the pandemic; the impact of national, regional and local
governmental laws, regulations and “shelter in place” or similar
orders relating to the pandemic which may materially adversely
impact the Company’s ability to continue operations; partial or
complete closures of one, more or all of the Company’s facilities
and work locations or the reduction of production rates (including
due to government mandates and to protect the health and safety of
the Company’s employees or as a result of employees being unable to
come to work due to COVID-19 infections with respect to them or
their family members or having to isolate or quarantine as a result
of coming into contact with infected individuals); production rates
may be further decreased as a result of the pandemic; ongoing and
future supply delays and shortages of parts and components, and
shipping and freight delays, and disruption to labor supply as a
result of the pandemic; the pandemic will likely adversely affect
operations of suppliers and customers, and reduce and delay, for an
unknown period, customers’ purchases of the Company’s products and
the supply of parts and components by suppliers; the anticipated
recovery of the Company’s markets in the future may be delayed or
increase in demand may be lower than expected as a result of the
continuing effects of the pandemic; the Company’s ability to obtain
access to additional capital if required; and the Company’s
financial performance and condition, obligations, cash flow and
liquidity and its ability to maintain compliance with the covenants
under its credit facilities, which may also negatively impact the
ability of the Company to pay dividends. There can be no assurance
that the Company will be able to maintain sufficient liquidity for
an extended period, obtain satisfactory covenant relief and other
amendments under its credit facilities in the future, or access to
additional capital or access to government financial support or as
to when production operations will return to previous production
rates. There is also no assurance that governments will provide
continued or adequate stimulus funding during or after the pandemic
for public transit agencies to purchase transit vehicles or that
public or private demand for the Company’s vehicles will return to
pre-pandemic levels in the anticipated period of time. The Company
cautions that due to the dynamic, fluid and highly unpredictable
nature of the pandemic and its impact on global and local
economies, supply chains, businesses and individuals, it is
impossible to predict the severity of the impact on the Company’s
business, operating performance, financial condition and ability to
generate sufficient cash flow and maintain adequate liquidity and
any material adverse effects could very well be rapid, unexpected
and may continue for an extended and unknown period of time.
Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that could
cause actions, events or results not to be as anticipated,
estimated or intended or to occur or be achieved at all. Specific
reference is made to “Risk Factors” in the Company’s Annual
Information Form for a discussion of the factors that may affect
forward-looking statements and information. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in forward-looking statements and information.
The forward-looking statements and information contained herein are
made as of the date of this press release (or as otherwise
indicated) and, except as required by law, the Company does not
undertake to update any forward-looking statement or information,
whether written or oral, that may be made from time to time by the
Company or on its behalf. The Company provides no assurance that
forward-looking statements and information will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers and investors should not place undue reliance on
forward-looking statements and information.
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