Babcock & Wilcox Enterprises said it faces a 5 p.m. Friday deadline to renegotiate its ability to borrow money and avoid credit defaults to ensure the long-time Barberton company remains "a going concern."
Company executives in a regulatory filing say they are in negotiations with lenders to avoid defaulting but cannot guarantee they will reach an agreement by the Friday deadline.
Shares of B&W, which have fallen well below $1, on Thursday closed down an additional 7 cents to 23 cents, a 24.4 percent drop in value.
So far, the company remains on track to sell its Barberton campus and relocate to new headquarters in Akron’s East End development later this year as part of a plan to save money. B&W has about 4,000 employees globally, including about 650 primarily in Barberton and some in Copley.
B&W said in its annual 10-K filing with the Securities and Exchange Commission that it faces liquidity challenges related to six European renewable energy project contracts “which caused us to be out of compliance with certain financial covenants and resulted in events of default in the agreements governing certain of our debt …”
The company said it entered into agreements with lenders that resolved the defaults through amendments to its credit agreement and getting waivers through Friday.
A possible resolution to the liquidity problems could lead to a loss of control of the company, B&W warned in its regulatory filing.
B&W reported an operating loss of $426.6 million on slightly more than $1 billion in revenue in 2018. It designs, makes and services coal-fired power plant boilers, pollution control equipment and more. Its finances have been hurt in recent years as utilities have shut down coal plants and switched to cheaper and cleaner-burning natural gas.
The company said the renewable energy plants it helped build in Europe were hit with delays, higher costs, and contractual penalties. The company said it lost $238.1 million in 2018 and $128.2 million in 2017 on the projects.
“Management believes it is taking all prudent actions to address the substantial doubt about our ability to continue as a going concern, but we cannot assert that it is probable that our plans will fully mitigate the liquidity challenges we face,” B&W said in its SEC filing. “We are currently dependent upon the waivers granted in our most recent limited waiver to maintain our current compliance with the covenants in the Amended Credit Agreement, and since March 20, 2019, we have also been nearly fully drawn on the U.S. Revolving Credit Facility, such that only minimal additional amounts were available for borrowings or letters of credit.”
B&W executives said the company will require additional amendments to or waivers under its amended credit agreement and additional financing to fund working capital and settlements of two of our six European loss contracts “to continue as a going concern.”
Ongoing negotiations with lenders include whether B&W will provide director nomination rights to two of the related parties involved in the discussions, the company said in its filing. That could result in the parties being able to exercise control over the company, B&W said.
The company outlined how it addressed liquidity issues in 2018, including the sale of subsidiaries, cost reductions, restructurings, and refinancing agreements.
“If we fail to obtain necessary financing on acceptable terms or otherwise obtain short-term capital and continuing waivers with approval from our existing lenders, we may be unable to continue operation as a going concern,” B&W said in its 10-K filing.
Also, if the company cannot boost its stock price consistently above $1 a share it is in danger of being delisted from the New York Stock Exchange. The company said in its regulatory filing it is considering a reverse stock split, subject to shareholder approval, as one way to boost the per-share price and comply with NYSE listing standards.
At the end of 2018, B&W said it had cash and cash equivalents of $43.2 million and total debt of $176.2 million.
B&W Enterprises in June 2015 was spun off as its own publicly traded company from its former parent, now called BWX Technologies, Inc.
Jim Mackinnon covers business and county government. He can be reached at 330-996-3544 or email@example.com. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ