Sterling Construction enters $475 million five-year credit facilities

By Wendy Van Sickle

Columbus, Ohio, Oct. 2 – Sterling Construction Co. Inc. entered into $475 million of five-year credit facilities on Wednesday to help fund its acquisition of Plateau Excavation Inc. and repay an existing higher interest rate term loan, according to an 8-K filed with the Securities and Exchange Commission.

The new credit facilities consist of a $75 million revolver and a $400 million five-year term loan.

The revolver has a sublimit of $75 million for standby letters of credit and a $15 million sublimit for swingline loans.

An increase option permits the company to enlarge the facilities by up to $100 million, subject to some conditions.

BMO Capital Markets and BofA Securities are the lead arrangers and bookrunners. BMO Harris Bank, NA is the administrative agent. Bank of America, NA is the syndication agent.

Borrowings bear interest at Libor plus a margin ranging from 150 basis points to 350 bps, and the revolving commitment fee ranges from 20 bps to 40 bps, both depending on the leverage ratio.

Financial covenants include a maximum total leverage ratio at the last day of each fiscal quarter not to be greater than 4x from the quarter ending on Dec. 31, 2019 through and including June 30, 2020; 3.75x from the quarter ending on Sept. 30, 2020; 3.5x from the quarter ending on Dec. 31, 2020 through and including March 31, 2021; 3.25x from the quarter ending on June 30, 2021 through and including Sept. 30, 2021; and 3x from the quarter ending on Dec. 31, 2021 and onwards.

There is also a minimum fixed charge coverage ratio of 1.2x as of the last day of each fiscal quarter.

The credit facilities mature on Oct. 2, 2024.

Sterling Construction bought Plateau Excavation, an Austell, Ga.-based specialty contractor, for $375 million in cash and $25 million in Sterling Construction common stock and seller notes.

In connection with the new credit facilities, the company terminated its existing $85 million term loan.

Sterling Construction is a The Woodlands, Tex.-based construction company that specializes in heavy civil infrastructure construction and infrastructure rehabilitation as well as residential construction projects.

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