NN Inc updates loan agreements, expands credit capacity

NN Inc (NASDAQ:NNBR), a diversified industrial company, announced on Thursday amendments to its credit agreements that could affect the company's financial strategies. According to a recent SEC filing, NN Inc and certain subsidiaries have entered into amendments to their existing credit facilities to expand their borrowing capacity and make changes to their liquidity requirements.

The amendments, effective as of Wednesday, include changes to the Term Loan Credit Agreement and the ABL Credit Agreement, both originally dated March 22, 2021. The Term Loan Credit Agreement, amended by Oaktree Fund Administration, LLC as the administrative agent, now requires NN Inc to use net cash proceeds from any future sale and leaseback transactions to prepay outstanding principal debt.

Additionally, the permissible indebtedness limit for the purchase or lease of fixed assets has doubled from $20 million to $40 million, with a cap of $26,950,000 for any sale and leaseback transaction.

Modifications to the Domestic Liquidity requirements and other terms related to sale and leaseback transactions were also part of the amendment. Similarly, the ABL Credit Agreement, overseen by JPMorgan Chase (NYSE:JPM) Bank, N.A. as the administrative agent, reflects an increased limit for allowable indebtedness related to the financing of fixed or capital assets, matching the terms of the Term Loan Credit Agreement.

These amendments suggest a strategic move by NN Inc to increase its financial flexibility, potentially for asset acquisitions or improvements. It's important to note that while the amendments provide NN Inc with increased credit capacity, they also impose certain restrictions on how the company can allocate proceeds from sale and leaseback transactions.

In other recent news, diversified industrial manufacturer NN Inc. reported robust second-quarter results, underpinned by its ongoing transformation plan.

The company's net earnings per share for the quarter were $0.02, and it secured $34.3 million in new business awards year-to-date. It anticipates generating between $55 million and $70 million in new business awards for the full year.

Despite a 5.6% decrease in sales in the Mobile Solutions segment, the Power Solutions segment saw a 4.3% increase in sales to $50.2 million. Additionally, NN Inc's Chinese joint venture continues to perform well in the hybrid vehicle market. The company has also improved profitability in nine out of seven previously underperforming plants.

Regarding future developments, NN Inc. aims for net sales of $465 million to $485 million and adjusted EBITDA of $47 million to $51 million by 2024. The company also plans to achieve breakeven performance or better at all plants.

Despite some challenges, such as capacity limitations and underperforming plants, NN Inc. is taking decisive steps to address these issues and capitalize on growth opportunities.

InvestingPro Insights

In light of NN Inc's recent amendments to its credit agreements, investors might find the following real-time data and InvestingPro Tips particularly relevant. With a market capitalization of approximately $196.69 million, NN Inc's stock price movements have been quite volatile. This volatility is reflected in the price swings over various time frames, with a notable 20.55% return over the last three months and an impressive 88.94% return over the last year. However, the company has not been profitable in the last twelve months, with a negative P/E ratio of -3.59, and analysts do not expect profitability this year either.

Despite the lack of short-term profitability, NN Inc's liquid assets surpass its short-term obligations, which is a positive indicator of the company's liquidity. This financial cushion aligns with the company's recent strategic moves to increase financial flexibility, as seen in the credit agreement amendments. The company's revenue growth has experienced a slight decline of -3.3% over the last twelve months, indicating some challenges in growing its top line. Nevertheless, the company has managed to maintain a gross profit margin of 15.74%, underscoring its ability to control costs relative to revenue.

For investors interested in a deeper dive, there are additional InvestingPro Tips available at https://www.investing.com/pro/NNBR, providing further insights into NN Inc's financial health and future prospects. These tips can help investors make more informed decisions in the context of the company's recent financial maneuvering.

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