Item 1.01 Entry into a Material Definitive Agreement.
On February 24, 2023, Williams Industrial Services Group Inc. (the "Company")
entered into (i) the fourth amendment (the "Term Loan Amendment") to its Term
Loan, Guarantee and Security Agreement, dated December 16, 2020, by and among
the Company and certain of its subsidiaries as borrowers or guarantors, EICF
Agent LLC, as agent for the lenders ("EICF"), and the lenders party thereto (as
amended, the "Term Loan Agreement") and (ii) the consent and fourth amendment
(the "RC Amendment") to its Revolving Credit and Security Agreement, dated
December 16, 2020, by and among the Company and certain of its subsidiaries as
borrowers or guarantors, PNC Bank, National Association, as agent for the
lenders ("PNC"), and the lenders party thereto (as amended, the "Revolving
Credit Agreement").
The Term Loan Amendment provides for delayed draw term loans in an aggregate
principal amount of $1,500,000, which were funded at the time the Term Loan
Amendment was signed, and discretionary delayed draw term loans in an aggregate
principal amount of $3,500,000, which will be funded at the lenders' discretion
(together, the "Delayed Draw Term Loans"). In addition to interest being payable
on the same basis as existing borrowings under the Term Loan Agreement, on the
earlier to occur of the maturity date or the termination date of the Term Loan
Agreement or any acceleration of the obligations under the Term Loan Agreement,
additional interest equal to 50% of the aggregate amount of the Delayed Draw
Term Loans borrowed will be payable. The Term Loan Amendment also includes a
minimum liquidity covenant. The Delayed Draw Term Loans are conditioned upon,
among other things, the Company using commercially reasonable best efforts to
actively receive net cash proceeds from issuances of subordinated debt or equity
of at least $500,000 on terms acceptable to EICF and the lenders under the Term
Loan Agreement, continuing its publicly announced review of strategic
alternatives and, subject to the exercise by the Board of Directors of the
Company of its fiduciary obligations, using commercially reasonable best efforts
to conduct such review in accordance with a customary indicative timeline. The
Term Loan Amendment also imposes certain additional reporting obligations on the
Company, including the weekly delivery of a 13-week cash flow forecast.
On February 21, 2023, Company received a $1,000,000 advance pursuant to the
then-existing terms of the Term Loan Agreement. In addition to interest being
payable on the same basis as existing borrowings under the Term Loan Agreement,
on the earlier to occur of the maturity date or the termination date of the Term
Loan Agreement or any acceleration of the obligations under the Term Loan
Agreement, additional interest equal to $500,000 will be payable in respect of
this $1,000,000 advance.
The RC Amendment, among other things, provides for the consent of PNC to the
Term Loan Amendment and incorporates into the Revolving Credit Agreement certain
of the conditions and covenants provided for in the Term Loan Amendment,
including the conditions to the Delayed Draw Term Loans, the minimum liquidity
covenant and the additional reporting obligations.
The Company expects to include each of the Term Loan Amendment and the RC
Amendment as an exhibit to a future periodic report, to be filed with the U.S.
Securities and Exchange Commission (the "SEC"). The foregoing descriptions do
not constitute a complete summary of the terms of the Term Loan Amendment or the
RC Amendment and are qualified in their entirety by reference to the full text
of the respective amendment.
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 in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 2.03.
Item 8.01 Other Events.
Press Release
On March 2, 2023, the Company issued a press release announcing the amendments
to the credit agreements, among other things. A copy of the press release is
attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Liquidity Update
In providing this liquidity update, reference is made to the Company's Current
Report on Form 8-K filed with the SEC on January 11, 2023 (the "Prior Report").
This update should be read together with the Prior Report and the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 2022.
As previously reported, the Company's January 9, 2023 amendments to the Term
Loan Agreement and the Revolving Credit Agreement and the incurrence, as of that
date, of subordinated indebtedness in the principal amount of $750,000 from
Wynnefield Partners Small Cap Value, LP and Wynnefield Partners Small Cap Value,
LP I (together, the "Wynnefield Funds"), provided important funding to the
Company for use in the ongoing conduct of its business and were intended to
alleviate the Company's liquidity constraints to an extent sufficient to permit
the Company to continue to operate while it engaged in its previously announced
process to explore strategic alternatives for the Company, including a potential
sale.
While continuing to operate its business in recent months, the Company is
implementing various elements of its previously disclosed liquidity improvement
plan, which included taking steps to address profitability of non-performing
businesses, aggressively reducing operating expenses, shortening the collection
cycle time on the Company's accounts receivable, and lengthening the payment
cycle time on its accounts payable.
The Company has continued to experience material intra-week liquidity pressure
as it has attempted to manage the short-term negative cash flows that result
from, among other things, having to fund significant weekly craft labor payrolls
on large outage projects before those payrolls can be billed to the Company's
customers and collected. Although the Company has utilized the Revolving Credit
Agreement to address such time period negative cash flows, contract terms
restricting customer invoicing frequency, delays in customer payments, and
underlying surety bonds have negatively impacted the Company's borrowing base
and the availability of funds.
The continuing liquidity pressures resulting from these developments required
that the Company negotiate the February 24, 2023 amendments to the Term Loan
Agreement and the Revolving Credit Agreement described in Item 1.01 of this
Current Report on Form 8-K.
As previously disclosed, a variety of factors can affect the Company's short-
and long-term liquidity, the impact of which could be material, including, but
not limited to: the funding of certain of the Company's previously disclosed
loss-contracts; cash required for funding ongoing operations and projects;
matters relating to the Company's contracts, including contracts billed based on
milestones that may require the Company to incur significant expenditures prior
to collections from its customers and others that allow for significant upfront
billing at the beginning of a project, which temporarily increases liquidity in
the near term; the outcome of potential contract disputes, which may be
significant; payment collection issues, including those caused by economic
slowdowns or other factors which can lead to credit deterioration of the
Company's customers; required payments of interest under the Term Loan Agreement
and the Revolving Credit Agreement and on the Company's operating and finance
leases; pension obligations requiring annual contributions to multiemployer
pension plans; insurance coverage for contracts that require the Company to
indemnify third parties; and issuances of letters of credit.
The Company believes that the February 24, 2023 amendments to the Term Loan
Agreement and the Revolving Credit Agreement described in Item 1.01 of this
Current Report on Form 8-K will, if the discretionary Delayed Draw Term Loans
under the Term Loan Agreement are advanced, provide much needed support to the
Company's ongoing operations and should permit the Company to operate while it
continues to engage in its previously announced process to explore strategic
alternatives to maximize value for the Company and its shareholders or other
stakeholders, but additional liquidity support may be necessary. The Company has
not disclosed a timetable for the conclusion of its review of strategic
alternatives, nor has it made any decisions related to any further actions or
possible strategic alternatives at this time. The Company does not intend to
comment on the details of its review of strategic alternatives until it
determines that further disclosure is appropriate or necessary.
If the Company is unable to address any potential liquidity shortfalls that may
arise in the future, it will need to seek additional funding from third party
sources, which may not be available on reasonable terms, if at all, and the
Company's inability to obtain this capital or execute an alternative solution to
its liquidity needs could have a material adverse effect on the Company's
shareholders and creditors. Importantly, any such additional funding could only
be obtained in compliance with the restrictions contained in the agreements
governing the Company's existing indebtedness. If the Company is unable to
comply with its covenants under its indebtedness, or the lenders under the Term
Loan Agreement do not exercise their discretion to fund the Delayed Draw Term
Loans, the Company's liquidity may be further adversely affected and could
result in an event of default under such indebtedness and the potential
acceleration of outstanding indebtedness thereunder and the potential
foreclosure on the collateral securing such debt, and would likely cause a
cross-default under the Company's other outstanding indebtedness or obligations.
If the Company's liquidity improvement plan and the January 9, 2023 and
February 24, 2023 amendments to the Company's Term Loan Agreement and the
Revolving Credit Agreement do not have the intended effect of addressing the
Company's liquidity problems through its review of strategic alternatives, the
Company will continue to consider all strategic alternatives, including
restructuring or refinancing its debt, seeking additional debt or equity
capital, reducing or delaying the Company's business activities and strategic
initiatives, or selling assets, other strategic transactions and/or other
measures, including obtaining relief under the U.S. Bankruptcy Code.
The Company's continuation as a going concern is dependent upon its ability to
successfully implement its liquidity improvement plan and obtain necessary debt
or equity financing to address the Company's liquidity challenges and continue
operations until the Company returns to generating positive cash flow or is
otherwise able to execute on a transaction pursuant to its review of strategic
alternatives, including a potential sale of the Company.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains "forward-looking statements" within the
meaning of the term set forth in the Private Securities Litigation Reform Act of
1995. The forward-looking statements include statements or expectations
regarding the Company's liquidity situation and the outcome of the Company's
review of strategic alternatives, including engaging in a potential sale,
restructuring or refinancing its debt, seeking additional debt or equity
capital, reducing or delaying its business activities and strategic initiatives,
or selling assets, other strategic transactions and/or other measures, including
obtaining relief under the U.S. Bankruptcy Code, the Company's ability to
successfully implement its liquidity improvement plan and, if necessary, to
obtain additional funding on reasonable terms, or at all, the Company's ability
to obtain support from customers in dealing with its liquidity challenges,
future demand for the Company's services, the Company's funding levels and
ability to continue operations, and expectations regarding future revenues, cash
flow, and other related matters. These statements reflect the Company's current
views of future events and financial performance and are subject to a number of
risks and uncertainties, including the Company's ability to continue to
implement its liquidity improvement plan and to continue as a going concern; the
Company's level of indebtedness and ability to make payments on, and satisfy the
financial and other covenants contained in, its amended debt facilities, as well
as its ability to engage in certain transactions and activities due to
limitations and covenants contained in such facilities; its ability to generate
sufficient cash resources to continue funding operations, including investments
in working capital required to support growth-related commitments that it makes
to customers, and the possibility that it may be unable to obtain any additional
funding as needed or incur losses from operations in the future; exposure to
market risks from changes in interest rates; the Company's ability to obtain
adequate surety bonding and letters of credit; the Company's ability to maintain
effective internal control over financial reporting and disclosure controls and
procedures; the Company's ability to attract and retain qualified personnel,
skilled workers, and key officers; failure to successfully implement or realize
its business strategies, plans and objectives of management, and liquidity,
operating and growth initiatives and opportunities, including any expansion into
new markets and its ability to identify potential candidates for, and
consummate, acquisition, disposition, or investment transactions (including any
that may result from the Company's review of strategic alternatives); the loss
of one or more of its significant customers; its competitive position; market
outlook and trends in the Company's industry, including the possibility of
reduced investment in, or increased regulation of, nuclear power plants,
declines in public infrastructure construction, and reductions in government
funding; costs exceeding estimates the Company uses to set fixed-price
contracts; harm to the Company's reputation or profitability due to, among other
things, internal operational issues, poor subcontractor performance or
subcontractor insolvency; potential insolvency or financial distress of third
parties, including customers and suppliers; the Company's contract backlog and
related amounts to be recognized as revenue; its ability to maintain its safety
record, the risks of potential liability and adequacy of insurance; adverse
changes in the Company's relationships with suppliers, vendors, and
subcontractors, including increases in cost, disruption of supply or shortage of
labor, freight, equipment or supplies, including as a result of the COVID-19
pandemic; compliance with environmental, health, safety and other related laws
and regulations, including those related to climate change; limitations or
modifications to indemnification regulations of the U.S.; the Company's expected
financial condition, future cash flows, results of operations and future capital
and other expenditures; the impact of unstable market and economic conditions on
our business, financial condition and stock price, including inflationary cost
pressures, supply chain disruptions and constraints, labor shortages, the
effects of the Ukraine-Russia conflict and ongoing impact of COVID-19, and a
possible recession; our ability to meet expectations about our business, key
metrics and future operating results; the impact of the COVID-19 pandemic on the
Company's business, results of operations, financial condition, and cash flows,
including global supply chain disruptions and the potential for additional
COVID-19 cases to occur at the Company's active or future job sites, which
potentially could impact cost and labor availability; information technology
vulnerabilities and cyberattacks on the Company's networks; the Company's
failure to comply with applicable laws and regulations, including, but not
limited to, those relating to privacy and anti-bribery; the Company's ability to
successfully implement its new enterprise resource planning (ERP) system; the
Company's participation in multiemployer pension plans; the impact of any
disruptions resulting from the expiration of collective bargaining agreements;
the impact of natural disasters, which may worsen or increase due to the effects
. . .
Item 9.01 Financial Statements and Exhibits.
Exhibit Number Description
99.1 Press Release, dated March 2, 2023.
104 Cover Page Interactive Data File (formatted as inline XBRL and
contained in Exhibit 101).
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