- Company now positioned to return to
profitability by unlocking the value of its core businesses
- Agreement provides a $150 million term
loan and additional $15 million incremental facility
- Settlements significantly reduce and
limit risks and obligations on European Vølund loss contracts
- Investor call and webcast set for April
8, 2019
Babcock & Wilcox Enterprises, Inc. ("B&W") (NYSE: BW)
announced today it has taken strategic action to significantly
strengthen its financial position and chart a path to profitability
in 2019. The Company has amended its credit agreement with its
current lenders, whereby B. Riley FBR, Inc. has joined the facility
and has arranged an additional $150 million in secured financing
via a last out term loan and has agreed to provide an uncommitted
incremental credit facility of up to another $15 million. This
follows an additional $10.0 million in commitments from affiliates
of B. Riley FBR under a last out term loan announced on March 19,
2019.
Proceeds from the new financing have allowed B&W to settle
and significantly limit future liabilities on its two remaining
Vølund European loss projects and terminate its obligations on an
additional European waste-to-energy EPC contract which has not yet
reached the project phase. The new financing also provides the
additional liquidity the Company needs to release the value of its
core business and strong market position to pivot towards
profitability and positive cash flows.
“With this financing, combined with the reduction of liabilities
and risks from the Vølund loss contracts being vastly reduced
through these settlements and recent plant turnovers, we believe
the Company is on a path to profitability in 2019,” said Kenneth
Young, Chief Executive Officer, B&W. “We now can focus on
unlocking the real value and strong position of our power business,
along with value from the core technologies of Vølund and SPIG and
improving the profitability of our company.”
“We greatly appreciate our banks’ and shareholders’ support to
provide the financing necessary for the turnaround of Babcock &
Wilcox. This marks the beginning of a new era for all of our global
operations, customers and employees. We now have a much stronger
balance sheet to support our operations going forward,” Young said.
“We have maintained a strong reputation as a premier technology
provider across all of our global Babcock & Wilcox sectors, and
this financing will support our efforts going forward.”
In connection with the amendment, the Company has agreed to seek
shareholder approval to increase the number of its authorized
shares, execute within six months a $50 million rights offering at
$0.30 per share (the proceeds of which will be used for repayment
of a portion of the new debt) and, immediately thereafter, exchange
$35.1 million of the last out term loan held by Vintage Capital
Management LLC for common stock at $0.30 per share, issue
approximately 16.7 million warrants, each to purchase one share of
common stock for $0.01 per share, and execute a 1:10 reverse stock
split.
Vølund Contract Settlement Agreements
Under the settlement agreements announced in B&W’s 10-K
filing on April 2, 2019, B&W has paid a combined £70 million
(approximately $91.6 million at current exchange rates) to the
customers on its two remaining European Vølund loss projects –
referred to as the “second” and “fifth” projects in previous
communications – in exchange for significantly limiting the
Company’s obligations under these contracts, including a waiver of
the customer’s rejection and termination rights on the fifth
project. B&W has agreed to provide construction services on the
fifth project to complete key systems of the plant, not to exceed a
minimal cost to complete. The settlement also eliminates all
historical claims and remaining liquidated damages. Upon completion
of these activities in accordance with the settlement, the Company
will have no further obligation related to the fifth project other
than customary warranty of core products.
For the second project, the settlement clearly defines and
limits the remaining performance obligations and settles prior
claims. B&W expects to turn over this plant in May 2019 and
will then assume its operations and maintenance under a separate
contract.
The settlement of the additional European waste-to-energy EPC
contract mentioned previously was entered into by the Company to
eliminate any risk of the Company incurring potential losses should
it have to fulfill its obligations under the contract.
Conference Call Set for April 8
B&W will host a conference call and webcast on Monday, April
8, 2019 at 5 p.m. Eastern time.
B&W Chief Executive Officer Kenneth Young, B&W Chief
Financial Officer Louis Salamone and B&W Chief Strategy Officer
Henry Bartoli will discuss the new financing arrangements, as well
as the Company’s fourth quarter 2018 results.
The listen-only audio of the conference call will be broadcast
live via the Internet at www.babcock.com. The dial-in number for
participants in the U.S. is (833) 227-5843; the dial-in number for
participants outside the U.S. is (647) 689-4070. The conference ID
for all participants is 6287128. A replay of this conference call
will remain accessible in the investor relations section of the
Company's website for a limited time.
Advisors
Ducera Partners LLC and its affiliates are serving as financial
advisor to B&W, and King & Spalding LLP is serving as
B&W’s principal legal counsel with Wachtell, Lipton, Rosen
& Katz serving as special counsel to B&W’s board of
directors. CMS Cameron McKenna Nabarro Olswang LLP is serving as
legal counsel with respect to B&W’s European renewable energy
projects, and Alvarez & Marsal North America LLC’s Robert M.
Caruso is serving as B&W’s chief implementation officer with
respect to various corporate initiatives. Kirkland & Ellis LLP
is serving as legal counsel to Vintage Capital Management LLC, and
Brown Rudnick LLP is serving as legal counsel to B. Riley.
About B&W
Headquartered in Barberton, Ohio, Babcock & Wilcox is a
global leader in energy and environmental technologies and services
for the power and industrial markets. Follow us on Twitter
@BabcockWilcox and learn more at www.babcock.com.
Forward-Looking Statements
B&W cautions that this release contains forward-looking
statements, including, without limitation, statements relating to
our financing arrangements, future liquidity needs and future
performance. These forward-looking statements are based on
management’s current expectations and involve a number of risks and
uncertainties, including, among other things, our ability to
continue as a going concern; our ability to obtain and maintain
sufficient financing to provide liquidity to meet our business
objectives, surety bonds, letters of credit and similar financing;
the highly competitive nature of our businesses; our ability to
obtain all required shareholder and regulatory approvals for
portions of our financing transactions (including, among others,
the rights offering, last out term loan exchange and warrant
issuance) that remain to be completed in a timely manner; general
economic and business conditions, including changes in interest
rates and currency exchange rates; general developments in the
industries in which we are involved; cancellations of and
adjustments to backlog and the resulting impact from using backlog
as an indicator of future earnings; our ability to perform
contracts on time and on budget, in accordance with the schedules
and terms established by the applicable contracts with customers;
failure by third-party subcontractors, partners or suppliers to
perform their obligations on time and as specified; our ability to
realize anticipated savings and operational benefits from our
restructuring plans, and other cost-savings initiatives; our
ability to successfully address remaining items and any warranty
obligations within our accrued estimated costs for our Vølund &
Other Renewable segment; our ability to successfully partner with
third parties to win and execute contracts within the Vølund &
Other Renewable segment; changes in our effective tax rate and tax
positions, including any limitation on our ability to use our net
operating loss carryforwards and other tax assets as a result of an
"ownership change" under Section 382 of the Internal Revenue Code;
our ability to maintain operational support for our information
systems against service outages and data corruption, as well as
protection against cyber-based network security breaches and theft
of data; our ability to protect our intellectual property and renew
licenses to use intellectual property of third parties; our use of
the percentage-of-completion method to recognize revenue over time;
our ability to successfully manage research and development
projects and costs, including our efforts to successfully develop
and commercialize new technologies and products; the operating
risks normally incident to our lines of business, including
professional liability, product liability, warranty and other
claims against us; changes in, or our failure or inability to
comply with, laws and government regulations; actual of anticipated
changes in governmental regulation, including trade and tariff
policies; difficulties we may encounter in obtaining regulatory or
other necessary permits or approvals; changes in, and liabilities
relating to, existing or future environmental regulatory matters;
changes in actuarial assumptions and market fluctuations that
affect our net pension liabilities and income; potential violations
of the Foreign Corrupt Practices Act; our ability to successfully
compete with current and future competitors; the loss of key
personnel and the continued availability of qualified personnel;
our ability to negotiate and maintain good relationships with labor
unions; changes in pension and medical expenses associated with our
retirement benefit programs; social, political, competitive and
economic situations in foreign countries where we do business or
seek new business; the possibilities of war, other armed conflicts
or terrorist attacks; the willingness of customers and suppliers to
continue to do business with us on reasonable terms and conditions
as well as our ability to successfully consummate strategic
alternatives for non-core assets, if we determine to pursue them;
and our ability to maintain the listing of our common stock on the
NYSE. If one or more of these risks or other risks materialize,
actual results may vary materially from those expressed. For a more
complete discussion of these and other risk factors, see B&W’s
filings with the Securities and Exchange Commission, including our
most recent annual report on Form 10-K. B&W cautions not to
place undue reliance on these forward-looking statements, which
speak only as of the date of this release, and undertakes no
obligation to update or revise any forward-looking statement,
except to the extent required by applicable law.
Certain Information Regarding Participants in the
Solicitation
The Company and its directors and executive officers and other
members of management and employees may be deemed to be
participants in the solicitation of proxies in respect of the
matters discussed above for which shareholder approval will be
sought at an upcoming shareholder meeting. Certain information
regarding the interests of these participants and a description of
their direct and indirect interests, by security holdings or
otherwise, will be included in the proxy statement for the meeting
when it becomes available. Investors and security holders may
obtain copies of the proxy statement and any other related
documents free of charge through the website maintained by the SEC
at www.sec.gov or from the Company at the Investor Relations
section of its website, www.babcock.com, or, alternatively, by
directing a request by telephone or mail to Babcock & Wilcox
Enterprises, Inc., 20 South Van Buren Avenue, Barberton, Ohio
44203, Attention: Corporate Secretary.
Certain of the lenders, as well as certain of their respective
affiliates, have performed and may in the future perform for the
Company and its subsidiaries, various commercial banking,
investment banking, lending, underwriting, trust services,
financial advisory and other financial services, for which they
have received and may in the future receive customary fees and
expenses. B. Riley Financial, Inc. (together with its affiliates
“B. Riley”) and Vintage Capital Management LLC (“Vintage”) are each
lenders with respect to the Company’s last out term loans under the
Credit Agreement. Each of B. Riley and Vintage are significant
stockholders of the Company, with B. Riley owning approximately
6.4% of the Company's outstanding common stock and Vintage owning
approximately 14.9% of the Company’s outstanding common stock. As
previously disclosed, the Company and B. Riley are party to a
consulting agreement. Mr. Brian Kahn, manager of Vintage, is also a
director of the Company. B. Riley, through its affiliate, and
Vintage are also party to a letter agreement regarding the rights
offering, debt exchange and warrant issuance mentioned above.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190405005363/en/
Investor Contact:Megan WilsonVice President, Corporate
Development & Investor RelationsBabcock &
Wilcox704.625.4944 | investors@babcock.com
Media Contact:Ryan CornellPublic RelationsBabcock &
Wilcox330.860.1345 | rscornell@babcock.com
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