Layne Christensen amends facility, reduces commitments to $100 million

By Marisa Wong

Morgantown, W.Va., Aug. 19 – Layne Christensen Co. amended its existing asset-based credit facility on Aug. 17 to reduce total commitments to $100 million from $135 million and edit other terms, according to an 8-K filing with the Securities and Exchange Commission.

The amendment became effective upon closing of the sale of the company’s geoconstruction business.

The company also eliminated the $15 million “availability block.” Previously, the maximum amount that could be borrowed under the credit facility was reduced by the availability block until Layne had delivered to the agent under the facility financial statements and a compliance certificate for any fiscal quarter beginning after March 2 demonstrating, for that quarter and for the immediately preceding quarter, a consolidated fixed-charge coverage ratio of at least 1 time for four consecutive quarters ending with those quarters.

The amendment reduces the dollar amount of excess availability that must be maintained in order to avoid a cash dominion period and a covenant compliance period to $17.5 million from $25 million.

The quarterly commitment fee on unused commitments was increased to 0.75% from 0.5%.

In addition, calculation of the borrowing base was revised as follows: (a) 80% of book value of eligible billed accounts receivable; plus (b) equipment availability; minus (c) the equipment reserve; minus (d) any additional reserves established from time to time by the co-collateral agents.

As part of the amendment, the co-collateral agents established a reserve of $1 million for accounts receivable that are subject to counterclaims or disputes and a reserve equal to 10% of total billed receivables for accounts receivable that are subject to advance billing, in each case in lieu of excluding all of those receivables as was previously done.

For purposes of calculating the borrowing base, equipment availability will generally be equal to 85% of the net orderly liquidation value of eligible equipment as reflected on the most recent appraisal obtained by the co-collateral agents, subject to a 1% per quarter reduction, the filing said.

The equipment reserve is equal to the value of certain specialized equipment that the company’s surety providers have the right to use if necessary to complete a bonded project. Prior to the sale of Layne’s geoconstruction business, the equipment reserve was about $5.4 million. The company expects that as a result of the sale of the geoconstruction business, the equipment reserve will be reduced to roughly $2.6 million.

Layne’s borrowing base as of June 30, including the geoconstruction business segment, was about $91.8 million, and its excess availability was about $58.9 million. Following the sale, it estimates that the borrowing base and excess availability on a pro forma basis would be about $100 million and $67 million, respectively.

Layne Christensen is a water management, construction and drilling company based in the Woodlands, Texas.

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