Item 1.01. Entry into a Material Definitive Agreement.
On May 24, 2024, Argan, Inc. (the “Company”) and certain of its subsidiaries, as borrowers, entered into the Second Amended and Restated Replacement Credit Agreement with Bank of America, N.A. (the “Bank”), as the lender, with an expiration date of May 31, 2027 (the “New Credit Agreement”).
The New Credit Agreement supersedes the expiring credit agreement, as amended, that was executed on May 15, 2017, reduces the base lending commitment amount from $50.0 million to $35.0 million, increases the letter of credit fees to be consistent with current market conditions, and establishes the interest rate for revolving loans at the Secured Overnight Financing Rate (“SOFR”) plus 1.85%. In addition to the base commitment, the facility includes an accordion feature that allows for an additional commitment of $30.0 million, subject to certain conditions, that represents an increase from the $10.0 million accordion provided by our expiring credit agreement. The Company may use the borrowing ability to cover other credit instruments issued by the Bank for the Company’s use in the ordinary course of business as defined in the New Credit Agreement. Further, on May 31, 2024, the Company completed the negotiation of a companion facility, in the amount of $25.0 million, pursuant to which the Company’s Irish subsidiary, Atlantic Projects Company Limited (“APCL”), may cause the Bank’s European entity to issue letters of credit on its behalf (the “Master Issuance and Indemnity Agreement”) that will be secured by a blanket parent company guarantee issued by the Company to the Bank (the “Guarantee of Payment Agreement”).
Together, the New Credit Agreement, the companion facility, and the parent company guarantee are hereinafter referred to as the “Credit Facilities.”
The Credit Facilities include customary terms, covenants and events of default for credit facilities of this size and nature. Despite the reduction in the base amount of the credit commitment provided by the New Credit Agreement, the increased accordion amount and the addition of the Master Issuance and Indemnity Agreement companion facility provide the Company with greater flexibility in managing its credit requirements, at a potentially lower overall cost.
The foregoing summary of the Credit Facilities is not complete and is qualified in its entirety by reference to the New Credit Agreement; the Master Issuance and Indemnity Agreement between APCL and the Bank; and the Guaranty of Payment Agreement between the Company and the Bank, which are filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K and incorporated by reference herein.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above is hereby incorporated by reference into this Item 2.03.
