Item 1.01. Entry into a Material Definitive Agreement.
Amendment to Credit Agreement
Shiloh Industries, Inc. (the “Company”) entered into a Second Amendment Agreement, dated December 26, 2012 (the “Second Amendment”), of its Credit and Security Agreement, as amended (the “Credit Agreement”), with a syndication of lenders led by The Privatebank and Trust Company, as co-lead arranger, sole book runner and administrative agent, PNC Capital Markets, LLC, as co-lead arranger, PNC Bank, National Association, as syndication agent, The Huntington National Bank, as co-documentation agent, and RBS Citizens, National Association, as co-documentation agent. The Second Amendment amends the Credit and Security Agreement entered into on April 19, 2011 and amended on January 31, 2012.
The Second Amendment extends the commitment period to December 25, 2017 and increases the Company's revolving line of credit to $120 million, which may be increased to up to $200 million subject to the Company's pro forma compliance with financial covenants, the administrative agent's approval and the Company obtaining commitments for such increase.
Borrowings under the Credit Agreement bear interest, at the Company's option, at LIBOR or the base (or “prime”) rate established from time to time by the administrative agent, in each case plus an applicable margin. The Second Amendment reduces the interest rate margin on LIBOR loans from 2.5% to 1.5% and maintains a 0% rate margin on base rate loans through March 31, 2013. Thereafter, the interest rate margin on LIBOR loans will be 1.5% to 2.5% and on base rate loans will be 0% to 1.0%, depending on the Company's leverage ratio.
The Second Amendment also amends the maximum leverage and fixed charge coverage ratios. The Second Amendment has increased the permitted leverage ratio from 2.25 to 2.85 and specifies that the leverage ratio shall not exceed 2.85 to 1.00 to the conclusion of the Credit Agreement. Further, the Second Amendment improves the fixed charge coverage ratio reducing it from 2.50 to 2.00 and specifies that the fixed charge coverage ratio shall not be less than 2.00 to 1.00 to the conclusion of the Credit Agreement.
The above summary of the Second Amendment is qualified in its entirety by reference to the Second Amendment, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Membership Interest Purchase Agreement
On December 28, 2012, the Company, through a wholly-owned subsidiary, entered into and consummated the transactions contemplated by a Membership Interest Purchase Agreement, dated December 28, 2012 (the “Purchase Agreement”), among the subsidiary and all of the equity owners of Albany-Chicago Company LLC (“Albany-Chicago”), a producer of aluminum die cast and machined parts for the motor vehicle industry. The purchase price for the equity interests in Albany-Chicago was $55 million, subject to adjustment based on working capital.
The Purchase Agreement contains customary representations and warranties and covenants by each party. Both parties are obligated, subject to certain limitations, to indemnify the other under the Purchase Agreement for certain matters, including breaches of representations, warranties and covenants.