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Gulf Island Fabrication, Inc. (NASDAQ:GIFI), a $101 million market cap company specializing in fabricated structural metal products with annual revenues of $159 million, has provided a debtor-in-possession (DIP) credit agreement to ENGlobal Corporation and its subsidiaries, currently undergoing chapter 11 bankruptcy proceedings. InvestingPro analysis shows the company maintains a strong financial position with a ’GREAT’ overall health score and robust liquidity metrics. The agreement, subject to the final approval of the Bankruptcy Court, was initiated on Thursday, following the interim approval by the United States Bankruptcy Court for the Southern District of Texas, Houston Division.
Under the terms of the DIP Credit Agreement, Gulf Island will extend up to $2.1 million through a senior secured super-priority multiple-draw term loan facility. The loan will carry an interest rate of 12% per annum, with an additional 4% default rate applicable under certain conditions. This move aligns with Gulf Island’s strong balance sheet position, as InvestingPro data reveals the company holds more cash than debt and maintains a healthy current ratio of 4.93, indicating excellent ability to meet short-term obligations. This financing is secured by all present and future assets of the Borrower. Furthermore, a prepetition secured bridge loan of $400,000 made by Gulf Island will be converted into a loan under the same agreement.
The funds provided under the DIP Loans are designated for use as outlined in the DIP Credit Agreement or as approved by Gulf Island, including covering approved budget expenses. The maturity of the DIP Loans is tied to several potential outcomes, such as the sale of the Borrower or its assets, the execution of a reorganization or liquidation plan, or six months from the Petition Date, with provisions for earlier maturity in the event of a default.
Gulf Island is also considering the acquisition of certain core assets and related liabilities from the Borrower’s automation, government, and engineering services businesses. This evaluation and any subsequent bid to purchase parts of the Core Business will be subject to Bankruptcy Court approvals. If Gulf Island proceeds with a bid, the company has the right to a credit bid, where outstanding amounts from the DIP Loans could be offset against the Purchase Price. With a return on equity of 17% and trading at a P/E ratio of 6.88, Gulf Island demonstrates strong operational efficiency. Discover more detailed insights and 6 additional key ProTips about GIFI’s performance with a subscription to InvestingPro, including exclusive access to comprehensive Pro Research Reports covering 1,400+ top stocks.
The strategic move by Gulf Island to provide DIP financing indicates a potential interest in expanding its operations through the acquisition of assets from ENGlobal, although the final decision will depend on further evaluation and court approvals. The information disclosed is based on the recent SEC filing by Gulf Island Fabrication, Inc.
In other recent news, Gulf Island Fabrication reported its financial results for the fourth quarter of 2024, exceeding earnings per share (EPS) expectations with an actual EPS of $0.26, compared to the forecast of $0.12. However, the company did not meet revenue expectations, posting $37.4 million against a forecast of $41 million. The full-year revenue for 2024 was reported at $159 million, with an adjusted EBITDA of nearly $13 million and free cash flow of approximately $13 million. Gulf Island Fabrication is planning to expand into new services and markets, including high-tech and nuclear sectors, despite ongoing legal challenges with the North Carolina Department of Transportation. The company is also considering strategic acquisitions, supported by a robust cash position of $67 million. Analysts from firms like Johnson Rice have shown interest in the company’s potential in the fabrication segment and its acquisition pipeline. The company projects a 2025 consolidated EBITDA lower than the 2024 figure of $12.8 million, with anticipated capital expenditures of $2-3 million. CEO Richard Hupp expressed optimism about the company’s strategic acquisition plans and future momentum in LNG projects.
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