Babcock & Wilcox Enterprises Announces New $150 Million Senior Secured Credit Facility; Reaffirmed Credit Rating of BB+

Rhea-AI Summary

Babcock & Wilcox Enterprises, Inc. (BW) has entered into a new three-year senior secured credit agreement with Axos Bank, providing an asset-based revolving credit facility of up to $150 million. The refinancing is expected to save the company approximately $4 million in annual interest costs. Additionally, the company and its Senior Unsecured Notes received a reaffirmed credit rating of 'BB+' from the Egan-Jones Ratings Company.

Insights

Financial Analyst

The establishment of a new senior secured credit agreement with Axos Bank by Babcock & Wilcox Enterprises is a strategic financial maneuver that could potentially enhance the company's liquidity and operational flexibility. The increment in available credit from $50 million to $150 million represents a substantial increase in financial resources. This expansion in credit capacity could provide B&W with the necessary capital to invest in renewable energy growth initiatives and other accretive business opportunities, which could, in turn, drive revenue growth and increase shareholder value over time.

Furthermore, the anticipated annual interest cost savings of approximately $4 million suggests a proactive approach to cost management and financial optimization. For stakeholders, this implies that B&W is actively seeking ways to reduce expenses, which could result in improved net income margins and earnings per share. However, it is important to consider the terms of the new credit facility and the potential risks associated with increased leverage, such as the company's ability to service the debt and the impact on its balance sheet.

Credit Analyst

The reaffirmed BB+ credit rating by Egan-Jones Ratings Company is indicative of a stable outlook for Babcock & Wilcox Enterprises, albeit still below investment grade. This rating suggests that while there are risks involved, Egan-Jones has confidence in the company's financial stability and its ability to meet its financial commitments. The reaffirmation post-refinancing indicates that the credit rating agency does not foresee the new credit facility negatively impacting the company's creditworthiness.

It is critical for investors to understand that a BB+ rating, while respectable, still denotes a degree of speculative risk. The rating reflects a balance between the company's solid long-term growth capabilities through its technologies like BrightLoop™ and ClimateBright™ and the inherent uncertainties in the highly competitive and capital-intensive energy sector. Stakeholders should monitor how the company leverages its new credit facility to ensure that it translates into tangible growth rather than just an increase in debt levels.

Market Research Analyst

Babcock & Wilcox's focus on expanding its renewable technology offerings, specifically in hydrogen production and carbon capture, is strategically aligned with current market trends and the global push towards decarbonization. By securing a larger credit facility and reducing interest expenses, B&W may be better positioned to capitalize on these emerging market opportunities. The potential for stronger cash flows from their Thermal operations could indicate that the company is on a path to becoming a more significant player in the renewable energy sector.

However, the success of such initiatives will largely depend on market reception, regulatory environments and technological advancements. B&W's ability to execute its strategy and the performance of its new technologies will be critical in determining whether the increased financial leverage will result in a competitive advantage and ultimately, shareholder value. Stakeholders should consider the company's strategic direction and execution capabilities when assessing its future prospects.

• Establishes new revolving credit facility that replaces its prior facilities to enhance the Company’s liquidity and growth initiatives
• Refinancing expected to provide annual interest cost savings of approximately $4 million
• Company and its Senior Unsecured Notes received a reaffirmed credit rating of “BB+” from the Egan-Jones Ratings Company

AKRON, Ohio--(BUSINESS WIRE)-- Babcock & Wilcox Enterprises, Inc. ("B&W" or the "Company") (NYSE: BW) today announced that, effective January 18, 2024, it has entered into a new three-year senior secured credit agreement with Axos Bank (“Axos”) under which Axos has provided an asset-based revolving credit facility of up to $150 million that can be used to support letters of credit, renewable energy growth initiatives and potential accretive business purposes.

The new revolver provides for reduced interest rates on letters of credit and much greater flexibility, with overall use of up to $150 million, versus the previous facilities that were limited to a $50 million revolver and a separate letters of credit facility. The new Financing Agreements have a maturity date of January 18, 2027.

All obligations under the Company’s prior Credit Agreement with PNC Bank N.A. (“PNC”) as administrative agent have been discharged, and the Credit Agreement has been terminated. Letters of credit issued under the previous facility with PNC are expected to transition to the Axos facility over the next several months. The Company expects to achieve annual interest cost savings of approximately $4 million under its new facility.

B&W also announced that the Company and its Senior Unsecured Notes (NYSE: “BWSN” and “BWNB”) have received a reaffirmed credit rating of “BB+” from the Egan-Jones Ratings Company. The credit rating follows a comprehensive review and takes into consideration current market conditions.

Kenneth Young, B&W Chairman and Chief Executive Officer, commented, “The closing of this new facility and reaffirmation of our credit rating are significant positive developments that bolster our efforts to support multi-year projects and capitalize on future growth through evolving BrightLoop™ and ClimateBright™ technology opportunities. These developments also demonstrate the confidence both Axos and Egan-Jones have in B&W’s business, not only today but also in the years ahead.”

“With our recent strategy changes, we are confident in realizing stronger cash flows from our Thermal operations as we continue to expand and implement our new renewable technologies, including hydrogen production and carbon capture,” Young added. “The reaffirmation of our credit rating and our new Senior Secured Credit facility reflect the stability of our business model and our continued commitment to our long-term growth capabilities.”

About Babcock & Wilcox Enterprises

Headquartered in Akron, Ohio, Babcock & Wilcox Enterprises, Inc. is a leader in energy and environmental products and services for power and industrial markets worldwide. Follow B&W on LinkedIn and learn more at babcock.com.

Forward-Looking Statements

B&W cautions that this release contains forward-looking statements, including, without limitation, statements relating to B&W’s new $150 million senior secured credit agreement and the reaffirmation of its credit rating. These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties. For a more complete discussion of these risk factors, see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K. If one or more of these risks or other risks materialize, actual results may vary materially from those expressed. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and we undertake no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240122777090/en/

Investor Contact:

B&W Investor Relations

704.625.4944

investors@babcock.com

Media Contact:

Ryan Cornell

B&W Public Relations

330.860.1345

rscornell@babcock.com

Source: Babcock & Wilcox Enterprises, Inc.

FAQ

What is the new credit facility amount provided by Axos Bank?

The new credit facility provided by Axos Bank is up to $150 million.

What is the expected annual interest cost savings from the refinancing?

The company expects to achieve annual interest cost savings of approximately $4 million under its new facility.

What is the reaffirmed credit rating for the company and its Senior Unsecured Notes?

The company and its Senior Unsecured Notes received a reaffirmed credit rating of 'BB+' from the Egan-Jones Ratings Company.