HomeGrill ManufacturersWeber Needs a Covenant Waiver to Deal With Debt Problems

Weber Needs a Covenant Waiver to Deal With Debt Problems

A big reason why Weber is going private is they have unsustainable levels of leverage. BDT Capital pointed this out when they made their offer to Weber. Their leverage has gotten so bad that they’ve received a waiver on their debt covenants for their quarters ending December 31st, 2022 and March 31st, 2023.

Weber had a credit agreement with Bank of America with a maximum first lien leverage ratio covenant of 7:1, which was a pretty reasonable limit of a healthy company. That means that their borrowing can’t be more than seven times higher than their EBITDA for the previous four quarters. For example. if they earn $100 million for the year, then their debt can’t be higher than $700 million.

According to Weber’s most recent financial release, they had an adjusted EBITDA on the year of a $1 million loss, compared to a $307 million gain the prior year. That’s not going to cut it for pretty much any level of borrowing, which is why they needed to get a waiver to blow their covenants.

As part of their amended credit agreement that their outgoing CFO worked-out, the covenant waiver is contingent on Weber being taken private by BDT Capital. While it’s very likely that the transaction will happen, if it doesn’t, they have to pay a 3% penalty annually on the amount that they’re borrowing.

Banks don’t do anything for free, so the waiver cost Weber a 0.25% of their revolver commitments.

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