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Louisiana-Pacific Corporation (NYSE:LPX), a building materials manufacturer with a market capitalization of $6.4 billion, has entered into a significant amendment to its credit agreement, expanding its borrowing capacity, the company disclosed in a recent SEC filing. The Nashville-based company, which InvestingPro analysis shows maintains a strong financial health score of 3.14 (GREAT), amended its existing credit agreement, resulting in an increase in its senior secured revolving credit facility from $550 million to $750 million.
The amendment, effective as of Monday, includes several key changes to the company’s financial arrangements. The sub-limit for letters of credit has been raised from $60 million to $75 million. Moreover, the interest rate for revolving borrowings has been revised to offer an option between a base rate plus a margin of 0.6% to 1.6% or Term SOFR plus a margin of 1.6% to 2.6%. The base rate is determined by the highest of the Federal funds rate plus 0.5%, the U.S. prime rate, or one-month Term SOFR plus 1.0%. According to InvestingPro data, the company’s strong cash flows adequately cover its interest payments, with an EBITDA of $659 million in the last twelve months.
Additionally, the maturity date for the credit facility has been extended to March 26, 2032. The amendment also adjusts the capitalization ratio covenant, which now mandates a capitalization ratio of no more than 65% at the end of each fiscal quarter. This ratio is a measure of funded debt less unrestricted cash to total capitalization, reflecting the company’s financial leverage. Notably, InvestingPro data reveals the company operates with a moderate debt level, maintaining a healthy total debt to total capital ratio of just 6% and a strong current ratio of 2.86, indicating robust liquidity. Get access to the comprehensive Pro Research Report and 10+ additional ProTips about LPX’s financial position on InvestingPro.
The company will also incur an unused commitment fee, payable quarterly, which ranges from 0.175% to 0.425%. The applicable margins and fees are contingent on Louisiana-Pacific’s consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) relative to its cash interest charges.
The SEC filing indicates that the amendment provides for additional modifications, which are detailed in the First Amendment filed as Exhibit 10.1. This strategic financial move by Louisiana-Pacific aims to strengthen its liquidity and financial flexibility.
Investors and market watchers can refer to the full text of the First Amendment for a comprehensive understanding of the terms involved. The information reported here is based on the company’s statement in the SEC filing.
In other recent news, Louisiana-Pacific Corporation reported robust fourth-quarter earnings for 2024, with an earnings per share (EPS) of $1.03, surpassing analyst expectations of $0.73. The company achieved a revenue of $681 million for the quarter, contributing to a full-year total of $2.9 billion, marking a 14% increase from the previous year. Despite strong earnings, Louisiana-Pacific’s stock experienced a decline, reflecting investor concerns about future prospects or market conditions. RBC Capital Markets maintained an Outperform rating for Louisiana-Pacific, with a price target of $125, citing the company’s strategic reinvestment plans. Meanwhile, Truist Securities adjusted its price target to $126 from $135, keeping a Buy rating, acknowledging the company’s solid siding demand and growth investments. The company’s guidance for 2025 indicates siding revenue growth between 7-9%, with expectations for full-year EBITDA in the siding segment to be between $415 million and $425 million. Additionally, LP Building Solutions, a prominent player in the industry, expanded its board by appointing Kelly Barrett, bringing her extensive finance and leadership experience to the company. These recent developments highlight Louisiana-Pacific’s strategic focus on growth and market positioning amidst a challenging housing environment.
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