Clean Harbors (NYSE:CLH) Inc., the Massachusetts-based environmental and industrial services company, has entered into a significant financial agreement, expanding its borrowing capacity. On Monday, the company, along with its Canadian subsidiary, inked a seventh amended and restated credit agreement with Bank of America, N.A. and other lenders.
The new agreement, which amends a prior credit arrangement from October 28, 2020, increases the revolving credit facility to $600 million. This facility allows Clean Harbors and its Canadian subsidiary to access revolving loans and letters of credit up to specified limits, enhancing their financial flexibility.
As of the agreement's closing, Clean Harbors had no outstanding loans under the previous credit agreement, although $136.4 million in letters of credit remained outstanding. These will continue under the new agreement.
The facility is structured with a borrowing base that includes a significant percentage of eligible accounts receivable and cash deposits. It is set to expire on June 28, 2029, providing a medium-term financial cushion.
Interest rates for borrowings are linked to Term SOFR for the U.S. and Term CORRA for Canada, with additional percentage points per annum. Moreover, the company will incur fees for unused lines and outstanding letters of credit, which are standard in such agreements.
The facility is guaranteed by most of Clean Harbors' U.S. subsidiaries and secured by a first lien on the company's accounts receivable. Similarly, the Canadian subsidiary's obligations are guaranteed by Clean Harbors' Canadian subsidiaries with corresponding security.
The agreement includes covenaries that limit Clean Harbors' ability to incur additional debt and make certain types of investments, acquisitions, and distributions, ensuring financial discipline.
This financial maneuver provides Clean Harbors with increased liquidity and the ability to manage its capital needs more effectively. The new credit facility is a strategic move that underscores the company's commitment to maintaining a robust financial foundation.
InvestingPro Insights
In light of Clean Harbors Inc .'s recent financial agreement, which enhances their borrowing capacity, it is pertinent to consider the company's financial health and market performance. According to InvestingPro data, Clean Harbors boasts a market capitalization of $11.84 billion and operates with a Price/Earnings (P/E) ratio of 31.6, reflective of investor confidence and a valuation that anticipates growth. Additionally, the company has demonstrated a solid revenue growth of 3.27% over the last twelve months as of Q1 2024, with a gross profit margin of 30.9%, indicating efficient operations and a strong market position.
InvestingPro Tips highlight that Clean Harbors is trading at a high earnings multiple, which could suggest the stock is valued optimistically relative to earnings. However, this is balanced by the fact that the company's liquid assets exceed short-term obligations, providing financial stability. Moreover, analysts have revised their earnings upwards for the upcoming period, signaling potential for continued financial performance improvement. For those looking to delve deeper into the company's prospects, there are additional 9 InvestingPro Tips available, which can be accessed with a subscription. Interested readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing a comprehensive analysis to inform investment decisions.
Overall, the expanded credit facility and the company's current financial metrics underscore a strategic approach to growth and liquidity management, positioning Clean Harbors favorably in the environmental and industrial services sector.
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