DMC Global Closes $300 Million Senior Secured Credit Facility

Rhea-AI Summary

DMC Global Inc. (BOOM) has closed a $300 million, five-year senior secured credit facility to strengthen its balance sheet and improve financial flexibility. The facility will support growth strategies and the acquisition of the remaining 40% minority interest in Arcadia Products. The new credit facility holds the leverage ratio at a prudent level and has the strong support of a lending group expanded from four to seven institutions.

Insights

Financial Analyst

The closing of a $300 million senior secured credit facility by DMC Global Inc. is a significant development for the company's financial strategy. The structure of the facility, which includes a revolving credit facility, a term loan and a delayed draw term loan, provides DMC with a robust safety net and the flexibility to manage its capital requirements efficiently. The decision to replace the existing $200 million credit facility with this larger and more complex arrangement suggests confidence in the company's growth trajectory and a strategic approach to managing its debt profile.

The use of the term loan and revolving credit facility to refinance existing bank debt is a prudent move that could potentially lower interest costs and improve the company's debt maturity profile. The leverage ratio, currently at 1.25x and expected to rise to approximately 2.0x upon the acquisition of the remaining interest in Arcadia Products, remains within conservative bounds. This suggests a disciplined approach to leverage that should reassure investors about the company's risk management practices.

Furthermore, the facility's covenants, with a maximum total leverage ratio of 3.00x and a minimum debt service coverage ratio of 1.25x, indicate a level of protection for the lenders and imply a commitment by DMC to maintain a healthy balance sheet. The involvement of a syndicate of reputable financial institutions, including KeyBank as the administrative agent, reflects positively on DMC's creditworthiness and the perceived quality of its business prospects.

Market Research Analyst

DMC Global Inc.'s strategic focus on the architectural framing industry, particularly its move to acquire the remaining minority interest in Arcadia Products, underscores the company's ambition to consolidate its position in a niche market. Arcadia Products' specialization in providing building products to the commercial and ultra-high-end residential construction industries suggests DMC's aim to capitalize on specific growth areas within the broader construction sector. This move aligns with industry trends where companies are seeking to enhance their product offerings and market reach through strategic acquisitions.

The acquisition is expected to bring about operational synergies and strengthen DMC's market position. The timing of the put/call option exercise, set for December 2024, is strategically planned to coincide with the expected growth in the construction industry, potentially maximizing the value of the acquisition. Investors and stakeholders should monitor the integration process post-acquisition for signs of effective execution and synergy realization, which could have a positive impact on the company's stock performance.

Economist

The closing of DMC Global Inc.'s credit facility is indicative of a broader economic environment where interest rates and credit access play a critical role in corporate expansion strategies. The company's ability to secure a substantial credit facility at a time when interest rates might be fluctuating reflects a calculated risk in leveraging debt to finance growth. The potential increase in the company's leverage ratio following the acquisition of Arcadia Products must be weighed against the backdrop of economic conditions, including interest rate trends and the health of the construction industry.

Should interest rates rise, the cost of servicing debt could increase, putting pressure on DMC's financials. Conversely, if rates remain stable or decline, the company could benefit from lower borrowing costs, enhancing its ability to invest in growth initiatives. Additionally, the construction industry's performance is often tied to macroeconomic factors such as GDP growth, employment rates and consumer confidence. Any downturn in the economy could affect the demand for construction services and, by extension, DMC's business performance. Stakeholders should consider these macroeconomic factors when evaluating the company's financial decisions and future prospects.

BROOMFIELD, Colo., Feb. 07, 2024 (GLOBE NEWSWIRE) -- DMC Global Inc. (Nasdaq: BOOM) today announced it has closed a $300 million, five-year senior secured credit facility consisting of a $200 million revolving credit facility, a $50 million term loan and a $50 million delayed draw term loan. The facility replaces DMC’s prior $200 million credit facility.

“This new credit agreement strengthens our balance sheet and improves our near-term financial flexibility as we pursue strategic alternatives for our DynaEnergetics and NobelClad businesses, and seek to transform DMC’s portfolio,” said Michael Kuta, president and CEO. “Our enhanced liquidity will support our growth strategies in the architectural framing industry, including acquiring the remaining 40% minority interest in Arcadia Products.”

In December 2021, DMC acquired a 60% controlling interest in Arcadia Products LLC, a leading provider of architectural building products to the commercial and ultra-high-end residential construction industries. A put/call option on the remaining 40% stake in Arcadia becomes exercisable on December 23, 2024. The current estimated value of the put/call option, net of a tax bridge loan, is approximately $163 million.

“This new credit facility holds our leverage and debt service costs to a prudent level,” said Eric Walter, CFO. “We are pleased to have the strong support of our lending group, which has been expanded from four to seven institutions.”

Walter said DMC’s leverage ratio following the close of the credit facility remains at 1.25x and is expected to be approximately 2.0x if the Company executes the call on the 40% minority interest in Arcadia.

The $50 million term loan and approximately $70 million of the $200 million revolving credit facility will be used to refinance DMC’s existing bank debt. The $50 million delayed draw term loan and unused capacity on the revolving credit facility will be available to support the purchase of the remaining 40% of Arcadia.

The term loan requires annual amortization of 5% for the first two years, 7.5% for the next two years, and 10% in the fifth year with a bullet at maturity. The covenants of the credit facility have a maximum total leverage ratio of 3.00x and minimum debt service coverage ratio of 1.25x.

KeyBank, N.A., is serving as administrative agent, and the banking syndicate is made up of U.S. Bank, Bank of America, Bank of Oklahoma, CIBC, Commerce Bank, and Comerica Bank.

Safe Harbor Language
Except for the historical information contained herein, this news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements and information are based on numerous assumptions regarding present and future business strategies, our potential purchase of the remaining 40% minority interest in Arcadia Products and Arcadia’s growth strategy. Forward-looking information and statements are subject to known and unknown risks, uncertainties and other important factors that may cause actual results and performance to be materially different from those expressed or implied by such forward-looking information and statements, including but not limited to: our ability to realize sales from our backlog; our ability to obtain new contracts at attractive prices; the execution of purchase commitments by our customers, and our ability to successfully deliver on those purchase commitments; the size and timing of customer orders and shipments; changes to customer orders; product pricing and margins; fluctuations in customer demand; our ability to successfully navigate slowdowns in market activity or execute and capitalize upon growth opportunities; the success of DynaEnergetics’ product and technology development initiatives; our ability to successfully protect our technology and intellectual property and the costs associated with these efforts; consolidation among DynaEnergetics’ customers; fluctuations in foreign currencies; fluctuations in tariffs and quotas; the cost and availability of energy; the cyclicality of our business; competitive factors; the timely completion of contracts; the timing and size of expenditures; the timing and price of metal and other raw material; the adequacy of local labor supplies at our facilities; our ability to attract and retain key personnel; current or future limits on manufacturing capacity at our various operations; government actions or other changes in laws and regulations; the availability and cost of funds; our ability to access our borrowing capacity under our credit facility; geopolitical and economic instability, including recessions, depressions, wars or other military actions; inflation; supply chain delays and disruptions; transportation disruptions; general economic conditions, both domestic and foreign, impacting our business and the business of our customers and the end-market users we serve; as well as the other risks detailed from time to time in our SEC reports, including the annual report on Form 10-K for the year ended December 31, 2022. We do not undertake any obligation to release public revisions to any forward-looking statement, including, without limitation, to reflect events or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

About DMC Global
DMC Global is an owner and operator of innovative, asset-light manufacturing businesses that provide unique, highly engineered products and differentiated solutions. DMC’s businesses have established leadership positions in their respective markets and consist of: Arcadia, a leading supplier of architectural building products; DynaEnergetics, which serves the global energy industry; and NobelClad, which addresses the global industrial infrastructure and transportation sectors. Based in Broomfield, Colorado, DMC trades on Nasdaq under the symbol “BOOM.” For more information, visit: HTTP://WWW.DMCGLOBAL.COM.

CONTACT:
Geoff High
Vice President of Investor Relations
303-604-3924

FAQ

What is the purpose of DMC Global Inc.'s new $300 million credit facility?

The new credit facility is aimed at strengthening the balance sheet and improving financial flexibility.

What is the ticker symbol for DMC Global Inc.?

The ticker symbol for DMC Global Inc. is 'BOOM'.

Who is serving as the administrative agent for DMC Global Inc.'s new credit facility?

KeyBank, N.A., is serving as the administrative agent for the new credit facility.

What are the key features of the new credit facility?

The new credit facility consists of a $200 million revolving credit facility, a $50 million term loan, and a $50 million delayed draw term loan. It holds the leverage ratio at a prudent level and has the strong support of a lending group expanded from four to seven institutions.

How will the new credit facility support DMC Global Inc.'s growth strategies?

The new credit facility will support DMC Global Inc.'s growth strategies in the architectural framing industry, including acquiring the remaining 40% minority interest in Arcadia Products.