Essex Rental gets lender OK to tap revolving loans through Sept. 11

By Susanna Moon

Chicago, Aug. 21 – Essex Rental Corp.’s wholly owned subsidiary Essex Crane Rental Corp. obtained a forbearance under its credit terms with Wells Fargo Capital Finance LLC as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

Under the forbearance, Essex Crane may request additional revolving loans under its revolving credit facility through the period ending Sept. 11.

In exchange, Essex Crane will provide additional reporting and documentation, including the submission of a 13-week cash flow forecast.

As announced Aug. 5, the company failed to maintain the required minimum trailing 12-month fixed-charge coverage ratio of 1.1 times for the month ended June 30, triggering a default under its credit agreement.

The company entered into the forbearance on Aug. 20 with lenders that include PNC Bank, NA, Alostar Bank of Commerce, Kayne Senior Credit Fund (QP) LP, Kayne Senior Credit Fund LP, 1492 Capital LLC and Medley Capital Corp.

During the term of the forbearance, the company said it will work with its financial adviser to plan for a longer-term forbearance agreement or to otherwise cure the default.

As a result of the default, the lenders hired a new independent third-party appraiser to estimate the orderly liquidation value of the Essex Crane equipment fleet. The desktop appraisal conducted by the appraiser resulted in a reduction in the orderly liquidation value of Essex Crane’s rental equipment fleet of about $64.2 million.

As of July 31, the estimated orderly liquidation value of Essex Rental Corp.'s equipment fleet, after applying the impact of the most recent appraisal reduction of 19.4% on the consolidated equipment fleet, was about $267.1 million. As of July 31, Essex Rental Corp.’s outstanding debt obligations were about $220.7 million.

As previously reported, the failure to maintain the required minimum fixed-charge coverage ratio was due to increased legal and professional fees incurred during the six months ended June 30, as a result of the financial statement restatement and activist shareholder issues previously disclosed in addition to higher interest expense under the credit agreement. The default rate of interest went into effect on June 18, following a previously announced default under the credit facility.

The latest default may also trigger a default under the cross-default provisions contained within the company’s unsecured promissory notes, unless waived by the holders of those notes.

Essex is a provider of rental and distribution for mobile cranes based in Buffalo Grove, Ill.

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