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Comtech Telecommunications Corp. (NASDAQ:CMTL) has entered into amended credit agreements and made changes to its preferred stock, according to a recent 8-K filing with the Securities and Exchange Commission. The Chandler, Arizona-based company, specializing in radio and TV broadcasting and communications equipment, reached an agreement with its lenders to waive certain defaults related to its financial covenants for the second fiscal quarter. According to InvestingPro data, the company operates with a significant debt burden of $242.49 million and maintains a concerning current ratio of 0.8, indicating potential liquidity challenges. The stock currently trades near its 52-week low of $1.53, with an InvestingPro Financial Health score indicating weakness.
On Monday, Comtech secured an amendment to its existing credit agreement, resulting in reduced interest rate margins on term loans from 13.00% to 10.50% for SOFR Loans until compliance with financial covenants is demonstrated, potentially reverting to original margins thereafter. Additionally, the company has been granted the right to appoint an independent director to its board of directors under specific conditions.
Furthermore, the amended agreement allows the incurrence of $40.0 million of senior unsecured subordinated debt. The financial covenants related to fixed charge coverage ratio and net leverage ratio have been suspended until the quarter ending October 31, 2025, with a reduction in the minimum quarterly average liquidity requirement from $20.0 million to $17.5 million. InvestingPro analysis reveals the company is quickly burning through cash, with negative free cash flow of $74.04 million in the last twelve months. Get access to 20+ additional ProTips and comprehensive financial metrics with InvestingPro’s detailed research reports, available for over 1,400 US stocks.
In a related move, Comtech has modified the terms of its Series B-2 Convertible Preferred Stock with investors, including affiliates of Magnetar Capital LLC and White Hat Capital Partners (WA:CPAP) LP. The changes grant board observer rights and information access rights to the holders. On the same day, these shares were exchanged for newly issued Series B-3 Convertible Preferred Stock, with additional shares issued to the investors. This exchange did not generate any cash proceeds for the company.
The new Series B-3 Convertible Preferred Stock has substantially the same rights as the Series B-2, including conversion into common stock at $7.99 per share. The company also outlined the terms of the warrants that may be issued upon the repurchase of the Series B-3 Convertible Preferred Stock, detailing the exercise price and adjustments.
Comtech’s filing also noted the resignation of David B. Kagan from the company’s Board of Directors as of February 28, 2025, citing no disagreements with the company’s operations or policies.
This news comes as Comtech continues to navigate its financial covenants and seeks to strengthen its capital structure. The information in this article is based on Comtech Telecommunications Corp.’s SEC filing. InvestingPro data shows revenue declined by 11.65% in the last twelve months, though analysts suggest the stock may be undervalued at current levels. For deeper insights into Comtech’s valuation and comprehensive analysis, including exclusive Fair Value calculations and peer comparisons, explore the full Pro Research Report available on InvestingPro.
In other recent news, Comtech Telecommunications Corp. reported a significant earnings miss for Q1 2025, with earnings per share (EPS) at -$1.27, falling short of the analyst forecast of -$0.39. The company’s revenue also missed expectations, coming in at $115.8 million against a projected $131.37 million, marking a decline from $151.9 million in the previous year. Additionally, Comtech shareholders approved several key proposals at the company’s Fiscal 2024 Annual Meeting, including the election of directors and the ratification of Deloitte & Touche LLP as the independent registered public accounting firm. B.Riley analysts maintained a Buy rating on Comtech’s stock but lowered the price target from $9.25 to $7.00, citing the company’s challenging financial situation and ongoing restructuring efforts. Comtech also announced the appointment of David B. Kagan to its Board of Directors, aiming to leverage his extensive experience in the satellite communications industry. Furthermore, the company launched a new multipath radio platform designed to enhance secure and reliable communications in challenging environments. These developments highlight Comtech’s ongoing efforts to navigate financial difficulties while exploring strategic alternatives for some of its business segments.
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