DXP Enterprises, Inc. Refinances Existing Debt and Raises an Incremental $105M to Drive Growth

Rhea-AI Summary

DXP Enterprises (NASDAQ: DXPE) has successfully refinanced its existing Senior Secured Term Loan B (TLB) borrowings and raised an additional $105 million, bringing the total TLB borrowings to $649.5 million. The new loan matures on October 13, 2030, and is priced at Term SOFR plus a 3.75% margin, reducing the applicable margin by 100 basis points. This refinancing provides DXP with $110 million in cash on the balance sheet at close and supports its accelerating acquisition strategy.

The company plans to use the proceeds to repay existing TLB borrowings and for general corporate purposes, potential acquisitions, and transaction expenses. DXP's sales have grown from $1.0 billion in 2020 to $1.7 billion for the last twelve months ending June 30, 2024, with covenant compliance adjusted EBITDA increasing from $64.9 million to over $187.6 million in the same period. The pro forma net debt to EBITDA ratio stands at 2.75:1 following the transaction.

Positive

• Refinanced $649.5 million in TLB borrowings, including an incremental $105 million
• Reduced applicable margin for borrowings by 100 basis points to 3.75% over Term SOFR
• $110 million in cash on the balance sheet at close
• Extended loan maturity to October 13, 2030
• Estimated $6 million in annual interest expense savings
• Sales growth from $1.0 billion in 2020 to $1.7 billion for LTM ending June 30, 2024
• Covenant compliance adjusted EBITDA growth from $64.9 million in 2020 to over $187.6 million for LTM ending June 30, 2024
• Pro forma net debt to EBITDA ratio of 2.75:1

Negative

• None.

Insights

Financial Analyst

This refinancing deal is a significant positive development for DXP Enterprises. The company has successfully reduced its borrowing costs by 100 basis points, which translates to approximately $6 million in annual interest savings. This improved cost of capital will directly benefit the bottom line.

The additional $105 million in borrowing capacity, combined with $110 million cash on hand, provides substantial liquidity for DXP to pursue its growth strategy, particularly through acquisitions. With a pro forma net debt to EBITDA ratio of 2.75:1, the company maintains a healthy balance sheet despite the increased borrowing.

DXP's financial performance has been impressive, with sales growing from $1.0 billion in 2020 to $1.7 billion in the last twelve months and adjusted EBITDA increasing from $64.9 million to over $187.6 million in the same period. This strong cash flow generation supports the company's ability to service its debt and invest in growth initiatives.

Market Research Analyst

DXP Enterprises' refinancing move signals confidence in its growth trajectory and market position. The company's ability to secure favorable terms in the current economic environment suggests strong lender confidence in its business model and financial health.

The focus on accelerating acquisition strategy is noteworthy. In the fragmented industrial distribution sector, strategic acquisitions can rapidly expand market share, diversify product offerings and enhance geographical presence. This approach, coupled with organic growth initiatives, positions DXP well to capitalize on industry consolidation trends.

Investors should monitor DXP's acquisition pipeline and integration success, as these will be key drivers of future value creation. The company's track record of growing sales and EBITDA through its diversification and transformation efforts is encouraging, but maintaining this momentum will be important for long-term shareholder returns.

• $110 million in cash on the balance sheet at close
• Reduces applicable margin for borrowings by one hundred basis points
• Aligns actions to support accelerating acquisition strategy

HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. (NASDAQ: DXPE) today announced that it has closed on refinancing existing Senior Secured Term Loan B (“TLB”) borrowings and raising an incremental $105 million in TLB borrowings. Including the new borrowings, DXP will have $649.5 million in Senior Secured Term Loan B borrowings. The TLB borrowings mature on October 13, 2030, and are priced at Term SOFR plus an applicable margin of 3.75 percent.

DXP intends to use the proceeds to repay borrowings under DXP’s existing Senior Secured Term Loan B, and the remaining for general corporate purposes, potential acquisitions, and transaction fees and expenses. The transaction provides DXP with continued operational and financial flexibility to reinvest in the business and pursue its organic and acquisition growth strategy.

The Term Loan B borrowings are priced at 3.75 percent over Term SOFR and continue to include a secured leverage covenant ranging from 5.75:1 to 4.75:1. The new loan under the credit agreement is secured by substantially all of the company’s consolidated assets.

David R. Little, Chairman and Chief Executive Officer remarked, “We are pleased with another successful refinancing. Like last year at this time, we will take this positive momentum, close out the year strong and look to drive growth in 2025. Our capital allocation strategy includes a mix of continuing to fund growth; applying excess cash flow to debt service, when appropriate; reinvesting in the business through our facilities, equipment and software; and supporting DXP in the market. We plan to maintain liquidity and flexibility while pursuing growth opportunities and reinvesting in the business.”

Kent Yee, Chief Financial Officer added, “We are pleased with another successful refinancing of $649.5 million, consisting of our existing $544.5 million in TLB borrowings plus raising an incremental $105 million. This accomplished several objectives, including repricing our existing TLB borrowings, saving an estimated six million in annual interest expense and creating liquidity and flexibility going forward as we look to accelerate growth via acquisitions and strategically reinvest in the business. DXP continues to be well-positioned to support its disciplined growth strategy. DXP continues to diversify and transform the business as evidenced by sales growing from $1.0 billion in 2020 to $1.7 billion for the last twelve months ending June 30, 2024, and covenant compliance adjusted EBITDA growing from $64.9 million in 2020 to over $187.6 million through the twelve months ending June 30, 2024. We appreciate the support from our advisors and lender group. Based on the transaction closing at the end of the second quarter, DXP’s pro forma net debt to EBITDA was 2.75:1.”

Additional details regarding the refinanced TLB borrowings will be available in DXP’s Current Report on Form 8-K to be filed with the Securities and Exchange Commission by October 8^th.

About DXP Enterprises, Inc.

DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico, and Dubai. DXP provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production ("MROP") services that emphasize and utilize DXP’s vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services. DXP's breadth of MROP products and service solutions allows DXP to be flexible and customer-driven, creating competitive advantages for our customers. DXP’s business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services. For more information, go to www.dxpe.com.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made by or to be made by the Company) contains statements that are forward-looking. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future; and accordingly, such results may differ from those expressed in any forward-looking statement made by or on behalf of the Company. These risks and uncertainties include but are not limited to; ability to obtain needed capital, dependence on existing management, leverage, and debt service, domestic or global economic conditions, and changes in customer preferences and attitudes. In some cases, you can identify forward-looking statements by terminology such as, but not limited to, “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or the negative of such terms or other comparable terminology. For more information, review the Company’s filings with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241008038082/en/

Kent Yee

Senior Vice President CFO

713-996-4700 – www.dxpe.com

Source: DXP Enterprises, Inc.

FAQ

What is the new total amount of DXP Enterprises' (DXPE) Term Loan B borrowings after refinancing?

After refinancing, DXP Enterprises' (DXPE) total Senior Secured Term Loan B borrowings amount to $649.5 million, which includes the existing $544.5 million plus an incremental $105 million.

What is the new interest rate for DXP Enterprises' (DXPE) refinanced Term Loan B?

The new interest rate for DXP Enterprises' (DXPE) refinanced Term Loan B is Term SOFR plus an applicable margin of 3.75%, which represents a reduction of 100 basis points from the previous rate.

When does DXP Enterprises' (DXPE) newly refinanced Term Loan B mature?

DXP Enterprises' (DXPE) newly refinanced Term Loan B matures on October 13, 2030.

How much cash does DXP Enterprises (DXPE) have on its balance sheet after the refinancing?

DXP Enterprises (DXPE) has $110 million in cash on its balance sheet at the close of the refinancing transaction.

What is DXP Enterprises' (DXPE) pro forma net debt to EBITDA ratio after the refinancing?

DXP Enterprises' (DXPE) pro forma net debt to EBITDA ratio is 2.75:1 following the refinancing transaction.