Power Solutions International Announces Extension to $25 Million Shareholder Loan Agreement With Weichai America

Rhea-AI Summary

Power Solutions International (PSI) has extended its $25 million shareholder loan agreement with Weichai America Corp., its majority stockholder, until May 20, 2025. The loan bears interest at the Secured Overnight Financing Rate (SOFR) plus 4.05% per annum, with a minimum rate of 4.05% if SOFR is negative. The loan is fully drawn and is subordinated to PSI’s existing $50 million senior secured revolving credit facility with Standard Chartered Bank. Additionally, PSI has other outstanding loans with Weichai, including $50 million and $30 million agreements, with current borrowings of $50 million and $19.8 million, respectively.

Positive

• Extension of $25 million loan agreement provides financial stability until May 2025.
• Interest rate is relatively low at SOFR + 4.05% per annum.
• PSI has access to substantial funds: $50M from senior secured revolving credit and fully drawn $25M shareholder loan.

Negative

• Subordination of the $25 million loan to the $50 million senior secured revolving credit facility may pose financial risk.
• High overall indebtedness with borrowings totaling $119.8 million across several loans.
• Potential interest rate disadvantage if Weichai's borrowing cost exceeds the base rate.

WOOD DALE, Ill., May 21, 2024 (GLOBE NEWSWIRE) -- Power Solutions International, Inc. (the “Company” or “PSI”) announced today that it amended and restated its $25 million shareholder’s loan agreement (the “$25 Million Third Amended and Restated Shareholder’s Loan Agreement”) with its majority stockholder, Weichai America Corp. (“Weichai”), dated as of May 20, 2024, to extend the loan maturity date to May 20, 2025. The $25 million loan under the $25 Million Third Amended and Restated Shareholder’s Loan Agreement has been fully drawn as of the date of this release and is subordinated in all respects to the Company’s existing $50 million senior secured revolving credit facility with Standard Chartered Bank (of which $40 million has been borrowed as of May 20, 2024).

Borrowings under the $25 Million Third Amended and Restated Shareholder’s Loan Agreement will incur interest at the applicable Secured Overnight Financing Rate (“SOFR”), plus 4.05% per annum. Further, if the applicable term SOFR is negative, the interest rate per annum shall be deemed as 4.05% per annum. If the interest rate for any loan under the $25 Million Third Amended and Restated Shareholder’s Loan Agreement is lower than Weichai’s borrowing cost, the interest rate for such loan shall be equal to Weichai’s borrowing cost plus 1%.  

The Company previously entered into two separate loan agreements with Weichai, including the $50 million second amended and restated shareholder’s loan agreement (the “$50 Million Second Amended and Restated Shareholder’s Loan Agreement”) on November 29, 2023, and the $30 million second amended and restated shareholder’s loan agreement (the “$30 Million Second Amended and Restated Shareholder’s Loan Agreement”) on March 22, 2024. As of May 20, 2024, PSI had $50 million of borrowings under the $50 Million Second Amended and Restated Shareholder’s Loan Agreement and $19.8 million of borrowings under the $30 Million Second Amended and Restated Shareholder’s Loan Agreement.

About Power Solutions International, Inc.

Power Solutions International, Inc. (PSI) is a leader in the design, engineering and manufacture of a broad range of advanced, emission-certified engines and power systems. PSI provides integrated turnkey solutions to leading global original equipment manufacturers and end-user customers within the power systems, industrial and transportation end markets. The Company’s unique in-house design, prototyping, engineering and testing capabilities allow PSI to customize clean, high-performance engines using a fuel agnostic strategy to run on a wide variety of fuels, including natural gas, propane, gasoline, diesel and biofuels.

PSI develops and delivers complete power systems that are used worldwide in stationary and mobile power generation applications supporting standby, prime, demand response, microgrid, and co-generation power (CHP) applications; and industrial applications that include forklifts, agricultural and turf, arbor care, industrial sweepers, aerial lifts, irrigation pumps, ground support, and construction equipment. In addition, PSI develops and delivers powertrains purpose-built for medium-duty trucks and buses including school and transit buses, work trucks, terminal tractors, and various other vocational vehicles. For more information on PSI, visit www.psiengines.com. 

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements regarding the current expectations of the Company about its prospects and opportunities. These forward-looking statements are entitled to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) These statements may involve risks and uncertainties. These statements often include words such as “anticipate,” “believe,” “budgeted,” “contemplate,” “estimate,” “expect,” “forecast,” “guidance,” “may,” “outlook,” “plan,” “projection,” “should,” “target,” “will,” “would” or similar expressions, but these words are not the exclusive means for identifying such statements. These statements are not guarantees of performance or results, and they involve risks, uncertainties and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect the Company’s results of operations and liquidity and could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the Company’s forward-looking statements.

The Company cautions that the risks, uncertainties and other factors that could cause its actual results to differ materially from those expressed in, or implied by, the forward-looking statements include, without limitation: the impact of the macro-economic environment in both the U.S. and internationally on our business and expectations regarding growth of the industry; uncertainties arising from global events (including the Russia-Ukraine and Israel-Hamas conflicts), natural disasters or pandemics, and their impact on material prices; the effects of strategic investments on our operations, including our efforts to expand our global market share and actions taken to increase sales growth; the ability to develop and successfully launch new products; labor costs and other employment-related costs; loss of suppliers and disruptions in the supply of raw materials; the Company’s ability to continue as a going concern; the Company’s ability to raise additional capital when needed and its liquidity; uncertainties around the Company’s ability to meet funding conditions under its financing arrangements and access to capital thereunder; the potential acceleration of the maturity at any time of the loans under the Company’s uncommitted senior secured revolving credit facility through the exercise by Standard Chartered Bank of its demand right; the impact of rising interest rates; changes in economic conditions, including inflationary trends in the price of raw materials; our reliance on information technology and the associated risk involving potential security lapses and/or cyber-attacks; the ability of the Company to accurately forecast sales, and the extent to which sales result in recorded revenues; changes in customer demand for the Company’s products; volatility in oil and gas prices; the impact of U.S. tariffs on imports, the impact of supply chain interruptions and raw material shortages, including compliance disruptions such as the UFLPA delaying goods from China; the potential impact of higher warranty costs and the Company’s ability to mitigate such costs; any delays and challenges in recruiting and retaining key employees consistent with the Company’s plans; any negative impacts from delisting of the Company’s common stock par value $0.001 from the NASDAQ Stock Market and any delays and challenges in obtaining a re-listing on a stock exchange; and the risks and uncertainties described in reports filed by the Company with the SEC, including without limitation its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and the Company’s subsequent filings with the SEC.

The Company’s forward-looking statements are presented as of the date hereof. Except as required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

FAQ

What is the new maturity date for Power Solutions International's $25 million loan agreement?

The new maturity date is May 20, 2025.

What is the interest rate for Power Solutions International's $25 million loan?

The interest rate is the Secured Overnight Financing Rate (SOFR) plus 4.05% per annum, with a minimum rate of 4.05% if SOFR is negative.

What are the terms of subordination for Power Solutions International's $25 million loan?

The $25 million loan is subordinated in all respects to the $50 million senior secured revolving credit facility with Standard Chartered Bank.

How much has Power Solutions International borrowed under its senior secured revolving credit facility?

Power Solutions International has borrowed $40 million under its $50 million senior secured revolving credit facility with Standard Chartered Bank.

What is the total borrowing amount of Power Solutions International from Weichai America?

Power Solutions International has total borrowings of $69.8 million from Weichai America, comprising $50 million and $19.8 million from two separate agreements.