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REV Group, Inc. (NYSE:REVG), a manufacturer of specialty vehicles with a market capitalization of $1.63 billion, has entered into an amendment to its credit agreement, which adjusts several key financial terms, according to a recent 8-K filing with the Securities and Exchange Commission. The amendment was effective as of Monday, February 20, 2025. According to InvestingPro analysis, REV Group appears undervalued at current levels and maintains a perfect Piotroski Score of 9, indicating strong financial health.
The amendment, known as Amendment No. 3, modifies the company’s existing credit agreement from April 13, 2021, with JPMorgan Chase (NYSE:JPM) Bank N.A. acting as the Administrative Agent. Notably, the amendment extends the maturity of REV Group’s senior secured asset-based revolving credit facility by five years from the amendment’s effective date. With a current ratio of 1.72, the company maintains strong liquidity to meet its short-term obligations.
Additionally, the total commitments for revolving loans and letters of credit have been decreased from $550 million to $450 million. The sublimit for swingline loans has been increased from $30 million to $45 million. The interest rates applicable to all revolving loans under the credit facility have been revised, with the margin adjustment now based on the calculation of average quarterly availability in relation to the total revolving loan commitment.
The borrowing base calculation has been altered to include a larger percentage of eligible receivables, subject to a specified dilution reserve, while no longer factoring in eligible equipment or eligible real property. Correspondingly, real property assets have been released as collateral.
The amendment also modifies the minimum fixed charge coverage ratio covenant to 1.00 to 1.00 during certain periods. The compliance periods for maintaining this ratio and for providing certain financial reports have been modified as well.
Furthermore, the amendment adjusts the dollar thresholds applicable to customary affirmative and negative covenants in the credit agreement. It also allows REV Group, under certain conditions, to enter into an additional secured term loan credit facility with other financial institutions, provided it maintains specified leverage ratios and the debt is subordinated to the credit facility or subject to an intercreditor agreement acceptable to the Administrative Agent.
Investors and stakeholders can refer to Exhibit 10.1 of the 8-K filing for a comprehensive understanding of the amendment’s terms. This strategic financial restructuring reflects REV Group’s efforts to optimize its capital structure and maintain financial flexibility. The company currently operates with a moderate debt level, with a total debt-to-capital ratio of just 0.07. InvestingPro subscribers can access 12 additional key insights and a comprehensive Pro Research Report, which provides deep-dive analysis of REV Group’s financial position and growth prospects.
In other recent news, REV Group announced its Q3 Fiscal 2024 earnings, reporting an earnings per share (EPS) of $0.51, which aligned with analyst expectations, although revenue fell short at $597.9 million against a forecast of $630.99 million. Despite the revenue miss, the company saw a significant 49.7% increase in adjusted EBITDA, showcasing strong operational performance. The company has updated its fiscal 2024 guidance, projecting revenue between $2.350 billion and $2.450 billion, and adjusted EBITDA between $155 million and $165 million. Meanwhile, Baird maintained an Outperform rating on REV Group, raising the price target to $38, citing a large Specialty backlog as a key factor for anticipated margin and EPS expansion through 2027. The analyst from Baird also highlighted the company’s ability to generate meaningful free cash flow and the potential for future portfolio adjustments as positive indicators. Challenges persist in the RV market, with declining sales and dealer inventories, yet the company remains focused on efficiency improvements across its vehicle segments. The ongoing strategic initiatives and financial targets suggest a positive outlook for the company’s future performance.
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