Smart Sand, Inc. (NASDAQ:SND), a company specializing in mining and quarrying of nonmetallic minerals, has entered into a new $30 million asset-based credit facility, replacing its prior credit agreement. The new arrangement, effective as of Monday, was disclosed in a recent SEC filing.
The Yardley, Pennsylvania-based company, known for its involvement in the energy and transportation sectors, finalized the new five-year senior secured asset-based credit facility (ABL Credit Facility) on September 3, 2024. The facility was established through agreements with First-Citizens Bank & Trust Company, which will act as the issuing bank, swingline lender, and agent, alongside other lenders.
The ABL Credit Facility will provide Smart Sand with up to $30 million in non-amortizing revolving loans, which will be determined by a borrowing base that includes eligible inventory and accounts receivable. At the close of the deal, the company drew approximately $1 million, leaving an additional $29 million available under the initial borrowing base.
Interest rates for the borrowings are set at an applicable margin of 2.75% plus the secured overnight financing rate (SOFR). The credit facility is guaranteed by Smart Sand's wholly-owned domestic subsidiaries and is secured by a first-priority interest in the company's assets, excluding owned real estate and sand reserves.
The new credit agreement includes various covenants restricting Smart Sand's activities, such as incurring additional liens, new indebtedness, and making certain restricted payments. It also limits the company's ability to merge, consolidate, or dispose of assets. In specific scenarios, Smart Sand is required to maintain a minimum fixed charge coverage ratio of 1.1 to 1.0.
Concurrent with the new credit agreement, Smart Sand terminated its previous credit facility, which was set to mature on December 13, 2024, and allowed for up to $20 million in non-amortizing revolving loans.
This strategic financial move, as reported in the SEC filing, is part of Smart Sand's broader efforts to bolster its financial flexibility and support its operational needs. The company has yet to disclose how it plans to utilize the funds from the new credit facility.
In other recent news, Smart Sand Inc . delivered robust financial results for the second quarter of 2024, exceeding expectations. The company's sales volumes reached nearly 1.3 million tons and generated a significant $13.5 million in free cash flow. Despite a decrease in earnings from the previous quarter due to higher costs, Smart Sand showcased improved contribution margins and adjusted EBITDA.
The company is making strategic moves to expand its market share, with expansion efforts underway in the Bakken and Marcellus basins, and into the Canadian market. Two new terminals in Ohio will target the Utica Shale formation market. Smart Sand also announced plans to introduce shareholder value-returning initiatives later this year.
The company forecasts a contribution margin per ton in the $14 to $16 range for Q3, and capital expenditures for the year are projected to be between $10 million and $13 million. Despite strong overall performance, the company did experience a decrease in Q2 earnings compared to Q1.
These are recent developments for Smart Sand Inc.
InvestingPro Insights
As Smart Sand, Inc. (NASDAQ:SND) secures a new asset-based credit facility to enhance its financial agility, it's crucial for investors to consider the company's current financial health and market performance. According to InvestingPro data, Smart Sand has a market capitalization of $88.43 million and is trading at a high earnings multiple with a P/E ratio of 60.15. Despite a slight revenue decline over the last twelve months as of Q2 2024, with revenue growth at -2.26%, the company has shown a strong return over the last month, with a 16.38% price total return.
InvestingPro Tips suggest caution, as analysts have revised their earnings expectations downwards for the upcoming period, and they do not anticipate the company to be profitable this year. However, it's worth noting that Smart Sand's liquid assets exceed its short-term obligations, which could provide some stability in managing its new credit facility. For investors seeking a deeper analysis, InvestingPro offers additional tips, and the full scope of these insights can be found on the InvestingPro platform.
As Smart Sand navigates its financial strategy, these metrics and expert analyses can help investors make informed decisions. For further details on Smart Sand's performance and additional InvestingPro Tips, visit https://www.investing.com/pro/SND.
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