Drilling Tools International Corp. Amends and Extends ABL Credit Facility and Enters into New Term Loan
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The amendment to Drilling Tools International Corp's asset-based loan (ABL) and the addition of a new term loan signify a strategic move to bolster the company's financial structure. By increasing the ABL facility from $60 million to $80 million and securing a new $25 million term loan, DTI has effectively expanded its borrowing capacity. This financial maneuver could be interpreted as a proactive step to support the company's growth initiatives, such as mergers and acquisitions (M&A) and international expansion.
The improved terms, including a lower interest rate pegged to SOFR plus 2.50% and the removal of certain restrictive financial covenants, suggest a vote of confidence from PNC Bank in DTI's financial health and business model. Extended maturity to 2029 provides DTI with a longer horizon to execute its strategic plans without the immediate pressure of refinancing. The impact on DTI's stock could be positive as this financial restructuring may be seen as enhancing the company's liquidity and reducing near-term financial risks, allowing for potentially more aggressive investment in growth opportunities.
DTI's refinancing and the removal of negative financial covenants could indicate an improved competitive position within the oilfield services industry. The sector is highly sensitive to oil prices and market dynamics and companies that can secure flexible and cost-effective financing are better positioned to navigate volatile markets. By extending the maturity of its debt and increasing its borrowing capacity, DTI may have more leeway to adjust to market conditions and invest in technology or assets that differentiate its services.
Furthermore, the emphasis on international expansion and M&A activity points to DTI's strategic focus on scaling operations and diversifying its revenue streams. Stakeholders should monitor how effectively DTI deploys this capital to drive revenue growth and improve margins, as well as how it manages the increased debt in the context of industry cycles.
The legal aspect of DTI's refinancing involves complex negotiations and contractual adjustments, which have been successfully navigated as indicated by the completion of the ABL amendment and the new term loan. The involvement of reputable legal counsel like Winston & Strawn and Holland & Knight underscores the significance of these transactions in DTI's financial strategy.
Investors should appreciate the legal implications of the modified covenants, which typically include provisions that can affect a company's operational flexibility. The easing of these covenants could suggest that DTI has negotiated a more favorable position with its lender, potentially reducing the risk of covenant breaches that could trigger penalties or accelerate debt repayment. Such legal restructuring can be a critical factor in a company's ability to pursue growth while managing liabilities.
ABL Amendment Provides Additional Financial Flexibility, Extends Maturity to 2029 and Modifies Certain Financial Covenants
New Term Loan Adds
The ABL Amendment, among other things, increases the borrowing capacity from
DTI also announced it has entered into a new
"Since 2015, we have valued our partnership with and the continued support of PNC, which demonstrates their confidence in our management team, business model and outlook," said David Johnson, DTI's Chief Financial Officer. "The completion of this refinancing is an important step in DTI's trajectory and provides us with more favorable terms under which we can continue to invest in the growth and evolution of the Company, including further expanding our footprint internationally. This influx of capital also gives us additional financial flexibility to execute on our M&A initiatives while we continue to deliver best-in-class products and services to our clients."
The ABL Amendment and new Term Loan were entered into with PNC Bank acting as the sole lender and PNC Business Credit served as Administrative Agent. Winston & Strawn served as legal counsel for DTI and
Additional details on the Company's refinancing will be included in today's Form 8-K filing with the Securities and Exchange Commission, which investors are encouraged to read in its entirety.
About Drilling Tools International Corp.
DTI, with roots dating back to 1984, is a
Forward-Looking Statements
This press release may include, and oral statements made from time to time by representatives of the Company may include, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements regarding the business combination and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this press release are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "will," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward looking. These forward-looking statements include, but are not limited to, statements regarding the proposed transaction, including any statements regarding the expected timetable for completing the proposed transaction, benefits of the proposed transaction, DTI and its management team's expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward looking statements in this press release may include, for example, statements about: (1) the demand for DTI's products and services, which is influenced by the general level activity in the oil and gas industry; (2) DTI's ability to retain its customers, particularly those that contribute to a large portion of its revenue; (3) DTI's ability to remain the sole North American distributor of the Drill-N-Ream; (4) DTI's ability to employ and retain a sufficient number of skilled and qualified workers, including its key personnel; (5) DTI's ability to market its services in a competitive industry; (9) DTI's ability to execute, integrate and realize the benefits of acquisitions, and manage the resulting growth of its business; (6) potential liability for claims arising from damage or harm caused by the operation of DTI's tools, or otherwise arising from the dangerous activities that are inherent in the oil and gas industry; (7) DTI's ability to obtain additional capital; (8) potential political, regulatory, economic and social disruptions in the countries in which DTI conducts business, including changes in tax laws or tax rates; (9) DTI's dependence on its information technology systems, in particular Customer Order Management Portal and Support System, for the efficient operation of DTI's business; (10) DTI's ability to comply with applicable laws, regulations and rules, including those related to the environment, greenhouse gases and climate change; (11) DTI's ability to maintain an effective system of disclosure controls and internal control over financial reporting; (12) the potential for volatility in the market price of DTI's common stock; (13) the impact of increased legal, accounting, administrative and other costs incurred as a public company, including the impact of possible shareholder litigation; (14) the potential for issuance of additional shares of DTI's common stock or other equity securities; (15) DTI's ability to maintain the listing of its common stock on Nasdaq. You should carefully consider the risks and uncertainties described in the information presented in DTI's current report on Form 8-K filed June 27, 2023 (the "8-K") and the quarterly report on Form 10-Q filed November 14, 2023 (the "10-Q"). Such forward-looking statements are based on the beliefs of management of DTI, as well as assumptions made by, and information currently available to DTI's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed above and in the proxy statement, the 8-K or the 10-Q. All subsequent written or oral forward-looking statements attributable to DTI or persons acting on its behalf are qualified in their entirety by this paragraph. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of DTI and described in the 8-K and the 10-Q. DTI undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.
Contacts:
DTI Investor Relations
Ken Dennard / Rick Black
InvestorRelations@drillingtools.com
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SOURCE Drilling Tools International Corp.
FAQ
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