DXP Enterprises, Inc. Refinances Existing Debt and Raises an Incremental $125M to Drive Acquisition Growth

Rhea-AI Summary

DXP Enterprises, Inc. has closed on refinancing existing Senior Secured Term Loan B borrowings and raised an additional $125 million. The company now has $550.0 million in Senior Secured Term Loan B borrowings. The borrowings mature in 2030 and are priced at Term SOFR plus an applicable margin of 4.75 percent. The proceeds will be used for debt repayment, general corporate purposes, potential acquisitions, and transaction fees and expenses. The refinancing provides DXP with operational and financial flexibility to support its growth strategy.

Positive

• DXP Enterprises, Inc. has successfully refinanced its Senior Secured Term Loan B borrowings, raising an additional $125 million. This provides the company with increased financial flexibility to pursue its growth strategy, including potential acquisitions. The borrowings are priced at 4.75 percent over Term SOFR, allowing for cost savings on interest expense. The successful capital raising demonstrates confidence in DXP's plans and supports its ongoing capital structure actions.

Negative

• None.

• $107 million in cash on the balance sheet at close
• Reduces applicable margin for borrowings by fifty basis points
• Aligns ongoing capital structure actions to support 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 $125 million in TLB borrowings. Including the new borrowings, DXP will have $550.0 million in Senior Secured Term Loan B borrowings. The TLB borrowings mature on October 30, 2030, and are priced at Term SOFR plus an applicable margin of 4.75 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 operational and financial flexibility to reinvest in the business and pursue its organic and targeted acquisition growth strategy.

The Term Loan B borrowings are priced at 4.75 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 the company’s consolidated assets.

David R. Little, Chairman and Chief Executive Officer remarked, “We are pleased with the successful execution of our refinancing. We will take this positive momentum, close out the year strong and look to drive growth in 2024. This successful capital raising demonstrates the confidence lenders have in our current and long-term plans. This financing will support us in executing our strategy and funding both working capital, acquisition growth and reinvesting in the business. Our capital allocation strategy at this point in the cycle includes a mix of continuing to fund growth, applying excess cash flow to debt service, when appropriate, 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 to announce the successful completion of our $550 million refinancing, consisting of our existing $425 million in TLB borrowings plus raising an incremental $125 million. This accomplished several important objectives, including repricing our existing TLB borrowings, saving on interest expense and creating liquidity and flexibility going forward as we look to drive growth via acquisitions and strategically reinvest in the business. We are proactively putting DXP in a position to take advantage of market opportunities on behalf of all our stakeholders. DXP continues to be well-positioned to support its disciplined growth strategy. We continue to experience strong market interest and demand for DXP in these types of transactions, demonstrating the confidence that existing and new lenders, investors and other financial participants have in DXP and our efforts to diversify and transform the business as evidenced by covenant compliance adjusted EBITDA growing from $64.9 million in 2020 to over $161.9 million through the second quarter of 2023. 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 2.65:1”

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 17^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/20231016085051/en/

Kent Yee

Senior Vice President CFO

713-996-4700 – www.dxpe.com

Source: DXP Enterprises, Inc.

FAQ

What is the purpose of the refinancing?

The proceeds from the refinancing will be used for debt repayment, general corporate purposes, potential acquisitions, and transaction fees and expenses.

What is the interest rate on the borrowings?

The borrowings are priced at Term SOFR plus an applicable margin of 4.75 percent.

What does the refinancing provide DXP with?

The refinancing provides DXP with operational and financial flexibility to reinvest in the business and pursue its growth strategy.

What is the maturity date of the borrowings?

The borrowings mature on October 30, 2030.

How much in borrowings does DXP now have?

DXP now has $550.0 million in Senior Secured Term Loan B borrowings.

What is DXP's pro forma net debt to EBITDA ratio?

Based on the transaction closing at the end of the second quarter, DXP's pro forma net debt to EBITDA was 2.65:1.