CLEVELAND, OH - SIFCO Industries Inc. (NYSE American: SIF), a manufacturer of aircraft engines and engine parts, has entered into a new financing agreement providing a $20 million credit line and a $3 million term loan. The deal, signed on October 17, 2024, with Siena Lending Group LLC, also includes a $2.5 million subfacility for letters of credit.
The new credit facility replaces SIFCO's previous arrangements with JP Morgan Chase (NYSE:JPM) Bank, N.A., which were fully terminated on the same day. The fresh financing will support the company's working capital, capital expenditures, and general corporate needs. As of the closing date, SIFCO had drawn $12.6 million under the new facility.
The terms include a 4.5% interest rate over the Adjusted Term SOFR for revolving credit and letter of credit subfacility. The term loan carries a 5.5% interest rate over the Adjusted Term SOFR. Additionally, SIFCO agreed to pay a $230,000 closing fee, half of which was paid at closing, with the remainder due on the facility's first anniversary and maturity date.
The loan comes with a collateral monitoring fee of $126,000, payable in monthly installments and an unused line fee of 0.5% annually on the undrawn revolver amount. The borrowings are secured by a lien on substantially all assets of SIFCO and its subsidiaries, and a pledge of equity interests in the subsidiaries.
SIFCO must maintain compliance with a minimum fixed charge coverage ratio and adhere to covenants typical for such agreements, including restrictions on additional indebtedness, investments, and transactions with affiliates.
In other recent news, SIFCO Industries has finalized the sale of its wholly-owned subsidiary, C Blade S.p.A. Forging & Manufacturing, to an Italian entity, TB2 S.r.l. The transaction, part of SIFCO's strategic realignment, could lead to financial and operational restructuring for the company.
In addition to the divestiture, SIFCO has made significant changes to its Board of Directors, appointing Robert "Bob" Johnson, an experienced industry veteran with a distinguished career in the aerospace industry. The company also announced the departure of Peter Knapper from its Board of Directors, coinciding with his retirement as Chief Executive Officer.
In response to this vacancy, SIFCO is actively seeking a new board member to meet its regulatory requirements.
InvestingPro Insights
SIFCO Industries' new financing agreement comes at a crucial time for the company, as recent financial data from InvestingPro reveals both challenges and opportunities. Despite a strong revenue growth of 25.24% over the last twelve months, with Q3 2024 showing an impressive 33.89% quarterly increase, the company faces profitability hurdles.
InvestingPro Tips highlight that SIFCO suffers from weak gross profit margins, which is reflected in the latest data showing a gross profit margin of just 8.94%. This aligns with the company's need for additional financing to support working capital and capital expenditures.
The stock's performance has been mixed, with a strong return over the last three months (21.79%) and a significant price uptick over the last six months (36.0%). However, an InvestingPro Tip notes that the stock has fared poorly over the last month, declining by 13.92%. This recent volatility underscores the importance of the new credit facility in potentially stabilizing the company's financial position.
Investors should note that SIFCO does not pay a dividend, focusing instead on reinvesting in the business, as evidenced by the new financing arrangement. For those seeking more comprehensive analysis, InvestingPro offers additional tips and metrics to further evaluate SIFCO's financial health and prospects.
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