Star Equity Holdings Announces its KBS Builders Business Unit Closed a $4 Million Revolving Line of Credit with KeyBank
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Understanding the strategic financial moves of a company, such as Star Equity Holdings, can provide investors with a perspective on the company's liquidity and risk management. The establishment of a $4 million revolving line of credit with KeyBank represents a liquidity management tool that allows KBS Builders, a unit of Star Equity, to meet its immediate capital needs without diluting shareholder value through equity financing.
With this line of credit, KBS has the ability to borrow, repay and reborrow funds as needed, providing a buffer for fluctuations in cash flow due to the cyclical nature of the construction industry. The flexibility in funding is a positive sign for potential investors, as it indicates the company's commitment to maintaining operational stability. However, investors should also be aware of the interest rate of SOFR plus a margin of 3.00%, which will affect the cost of capital and, consequently, the company's net income and cash flows.
In evaluating the risk profile of Star Equity Holdings, the revolving line of credit provides a double-edged sword. On one hand, it endows KBS with the capital necessary to manage working capital and execute its business plan, which can lead to driven growth and valuation uplift in the long term. On the other hand, a revolving line of credit introduces leverage into the company's capital structure, which can increase financial risk, particularly if the company faces downturns in its business cycles.
Moreover, the maturity date of April 30, 2025 adds a time constraint on the financial flexibility provided by the credit line. The ability to extend the maturity based on fulfilling certain terms suggests covenants which could limit operational leeway. As for the investors, understanding how these financial instruments and associated terms work is vital for gauging the company's risk tolerance and assessing the potential impact on the investment.
OLD GREENWICH, Conn., April 25, 2024 (GLOBE NEWSWIRE) -- Star Equity Holdings, Inc. (Nasdaq: STRR; STRRP) (“Star” or the “Company”), a diversified holding company, announced today that its KBS Builders, Inc. (“KBS”) business unit has closed a
“We are pleased to announce the closing of this credit facility with KeyBank,” said David Noble, CFO of Star. “Star remains focused on providing growth capital to its operating companies in addition to preserving available cash for acquisitions. Star’s holding company structure offers its operating companies the ability to manage their own working capital needs, and this LOC gives KBS that flexibility. Partnering with a national bank of KeyBank’s prestige is a testament to the strength of the KBS business today and the remarkable transformation we have achieved since acquiring it in September 2019.”
The LOC has an April 30, 2025 maturity date, which can be extended based on fulfillment of certain terms and conditions. Borrowings under the LOC will bear an interest rate of SOFR plus an applicable margin of
About Star Equity Holdings, Inc.
Star Equity Holdings, Inc. is a diversified holding company currently composed of two divisions: Construction and Investments.
Construction
Our Construction division manufactures modular housing units for commercial and residential real estate projects and operates in two businesses: (i) modular building manufacturing and (ii) structural wall panel and wood foundation manufacturing, including building supply distribution operations for professional builders.
Investments
Our Investments division manages and finances the Company’s real estate assets as well as its investment positions in private and public companies.
Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release that are not statements of historical fact are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking Statements include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to acquisitions and related integration, development of commercially viable products, novel technologies, and modern applicable services, (ii) projections of income (including income/loss), EBITDA, earnings (including earnings/loss) per share, free cash flow (FCF), capital expenditures, cost reductions, capital structure or other financial items, (iii) the future financial performance of the Company or acquisition targets and (iv) the assumptions underlying or relating to any statement described above. Moreover, forward-looking statements necessarily involve assumptions on the Company’s part. These forward-looking statements generally are identified by the words “believe”, “expect”, “anticipate”, “estimate”, “project”, “intend”, “plan”, “should”, “may”, “will”, “would”, “will be”, “will continue” or similar expressions. Such forward-looking statements are not meant to predict or guarantee actual results, performance, events, or circumstances and may not be realized because they are based upon the Company's current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which the Company has no control over. Actual results and the timing of certain events and circumstances may differ materially from those described above as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, the substantial amount of debt of the Company and the Company’s ability to repay or refinance it or incur additional debt in the future; the Company’s need for a significant amount of cash to service and repay the debt and to pay dividends on the Company’s preferred stock; the restrictions contained in the debt agreements that limit the discretion of management in operating the business; legal, regulatory, political and economic risks in markets and public health crises that reduce economic activity and cause restrictions on operations (including the recent coronavirus COVID-19 outbreak); the length of time associated with servicing customers; losses of significant contracts or failure to get potential contracts being discussed; disruptions in the relationship with third party vendors; accounts receivable turnover; insufficient cash flows and resulting lack of liquidity; the Company's inability to expand the Company's business; unfavorable changes in the extensive governmental legislation and regulations governing healthcare providers and the provision of healthcare services and the competitive impact of such changes (including unfavorable changes to reimbursement policies); high costs of regulatory compliance; the liability and compliance costs regarding environmental regulations; the underlying condition of the technology support industry; the lack of product diversification; development and introduction of new technologies and intense competition in the healthcare industry; existing or increased competition; risks to the price and volatility of the Company’s common stock and preferred stock; stock volatility and in liquidity; risks to preferred stockholders of not receiving dividends and risks to the Company’s ability to pursue growth opportunities if the Company continues to pay dividends according to the terms of the Company’s preferred stock; the Company’s ability to execute on its business strategy (including any cost reduction plans); the Company’s failure to realize expected benefits of restructuring and cost-cutting actions; the Company’s ability to preserve and monetize its net operating losses; risks associated with the Company’s possible pursuit of acquisitions; the Company’s ability to consummate successful acquisitions and execute related integration, as well as factors related to the Company’s business including economic and financial market conditions generally and economic conditions in the Company’s markets; failure to keep pace with evolving technologies and difficulties integrating technologies; system failures; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; and the continued demand for and market acceptance of the Company’s services. For a detailed discussion of cautionary statements and risks that may affect the Company’s future results of operations and financial results, please refer to the Company’s filings with the Securities and Exchange Commission, including, but not limited to, the risk factors in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. This release reflects management’s views as of the date presented.
All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
| For more information contact: | |
| Star Equity Holdings, Inc. | The Equity Group |
| David Noble | Lena Cati |
| CFO | 212-836-9611 / lcati@equityny.com |
| 203-489-9502 | Katie Murphy |
| admin@starequity.com | 212-836-9612 / kmurphy@equityny.com |
FAQ
What did Star Equity Holdings announce regarding its KBS Builders business unit?
Who is providing the $4 million revolving line of credit to KBS Builders?
How does KBS Builders plan to use the revolving line of credit?
What is the maturity date of the line of credit?
What is the interest rate on the borrowings under the line of credit?
