Atlas Technical Consultants (ATCX) announces significant recapitalization and simplification of its capital structure
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Atlas Technical Consultants, Inc. (Nasdaq: ATCX) (together with its subsidiaries, “Atlas” or the “Company”), a leading provider of professional testing, inspection, engineering, environmental and consulting services, today announced a significant recapitalization and simplification of the Company’s capital structure. The Company replaced its current debt and preferred share agreements with a new, more economically advantageous term credit agreement, funded by funds and accounts managed or advised by Blackstone Credit or its affiliates, consisting of 432 million of long-term debt maturing in 2028 and a committed deferred drawing term loan of $ 75 million. The Company also replaced its existing revolving credit facility with a new five-year, $ 40 million revolving credit agreement with JPMorgan Chase Bank, NA (“JPMorgan Chase”). The Company used a portion of the net proceeds from the new debt to repay all of its $ 270 million of outstanding borrowings under its existing term loan, including transferring nearly $ 62 million of its borrowings to existing term in the new term loan facility, and to repay in-fill the Company’s outstanding $ 154 million in Series A preferred share units at a redemption price equal to par plus accrued and unpaid dividends.
David D. Quinn, Sr., Chief Financial Officer of Atlas, said: “This landmark transaction represents the latest transformational step in our multi-year plan to streamline and optimize our capital structure to support our growth objectives through the bias from both organic expansion and acquisitions of deleveraging. . With these hugely beneficial actions, we are eliminating our preferred equity, simplifying our debt structure, reducing borrowing costs, and adding financial flexibility for accretion initiatives. We anticipate that this recapitalization and the anticipated savings, along with disciplined cash management, will continue to improve the cash flow generated by our business and the returns on investment for our shareholders. We are extremely pleased to partner with two of the most respected lending partners at Blackstone and JPMorgan Chase and appreciate their confidence in our strategy and deep commitment to supporting our business as we accelerate our growth.
The transaction represents significant progress towards the Company’s short-term objective of simplifying and optimizing its capital structure, including the following benefits:
- Repurchases in full the outstanding preferred shares of the Company at par;
- Replaces the existing debt and preferred stock structure with a single $ 432 million long-term loan, a $ 75 million deferred drawing term loan, and a $ 40 million asset-based revolver with a uncommitted $ 20 million expansion function, providing sources of funding and increased liquidity for growth;
- Lowers the overall debt interest rate by almost 100 basis points, including a 375 basis point reduction in the interest rate spread on the gun over LIBOR plus 2.50%, while eliminating the LIBOR floor;
- Reduces long-term debt amortization from 5% per annum currently to 0% in the first year, then to 1% thereafter during the term of the loan, which has been extended by two years until 2028;
- Decreases average annual disbursements on aggregate debt service and dividends by approximately $ 13 million in the first year and $ 8 million thereafter;
- Increases access to liquidity by approximately $ 116 million over the next two years to support new growth initiatives and mergers and acquisitions; and
- Positions Atlas to accelerate its goal of reducing net debt through anticipated EBITDA growth by implementing the company’s organic growth and deleveraging the M&A strategy in the coming years.
Brad Colman, Senior Managing Director of Blackstone, said: “We are proud to be a partner of Atlas and its management team. Since its IPO, Atlas has demonstrated the resilience of its business model. The strong performance of the company during the pandemic further strengthened our belief in Atlas’s growth strategy and its solid foundation for producing attractive returns. Josh Lafer, Director of Blackstone, added, “With this transaction, we believe we are further optimizing the company’s capital structure for continued success. With over $ 500 million in committed capital from Blackstone, we believe Atlas is well positioned for growth as we see increased investment in transportation, infrastructure and environmental solutions across the United States over the course of the next few years.
L. Joe Boyer, CEO of Atlas, concluded: “This transaction builds on the significant progress we have made in improving our capital structure since becoming a public company. We are increasing our liquidity and unlocking additional cash flow which puts us in an even stronger position to execute our M&A strategy as an acquirer of choice. This increased flexibility, coupled with the increase in our backlog, allows our business to better grow and outperform as our end markets continue to improve. “
Including the exchange of Company warrants concluded at the end of 2020 and the continued conversion of Class B common shares into Class A shares, as of February 25, 2021, the Company had 35,280,412 common shares outstanding, including 15,111,978 category A shares and 20,168,434 category B shares.
Thompson & Knight LLP acted as legal counsel to Atlas, Willkie Farr & Gallagher LLP acted as legal counsel to Blackstone and Vinson & Elkins LLP acted as legal counsel to JPMorgan Chase.
About Atlas Technical Consultants
Based in Austin, Texas, Atlas is a leading provider of professional testing, inspection, engineering, environmental, program management and consulting services. Under the name Atlas Technical Consultants, we provide solutions to public and private sector clients in the transportation, commerce, water, government, education and industrial markets. With a national presence and more than 3,300 employees, Atlas provides a wide range of essential technical services, helping customers test, inspect, certify, plan, design and manage a wide variety of projects in various end markets. For more information, visit https://www.oneatlas.com.