Harte Hanks Amends Credit Facility To Improve Liquidity

Marketing services provider Harte Hanks, Inc. (NYSE:HHS) recently amended its credit facility to augment its liquidity and improve financial flexibility. The modified credit agreement is likely to provide the means to undertake strategic investments to spur long-term growth of the company.

The amended credit facility increases Harte Hanks’ borrowing capacity from $20 million to $22 million. The modified credit agreement with Texas Capital Bank also extended the debt maturity by a year to April 2020. Harte Hanks intends to utilize the modified debt facility to meet its working capital requirements and for general corporate measures.

The credit facility is secured by substantially all assets of the company and its material domestic subsidiaries. It is guaranteed by HHS Guaranty, LLC, an entity formed to provide credit support for Harte Hanks by certain members of the Shelton family (descendants of one of its founders).

The improvement in credit facility is part of the measures undertaken by the company to boost its operating metrics and raise share price in accordance with the continued listing standards of the NYSE. In December last year, Harte Hanks received a notice from the benchmark index for failure to maintain an average closing price in excess of $1.00 for a 30-day period. Consequently the company was awarded a six-month cure period to conform to the NYSE listing standards and avoid delisting.

In order to avoid such a scenario, Harte Hanks has decided to adopt a 10 for one reverse split of its shares, likely to be effective on Jan 31, 2018. As a result, 10 corporate shares would be effectively merged as a single share of higher face value, thus offering it an opportunity to comply with the listing rules.

Harte Hanks has underperformed the industry in the last three months with an average loss of 9.5% compared with 2.2% decline for the latter. Whether the improved liquidity measures would help the company to have a significant turnaround in its operations remains to be seen.

Harte Hanks carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include InnerWorkings, Inc. (NASDAQ:INWK) , MDC Partners Inc. (NASDAQ:MDCA) and S&P Global Inc. (NYSE:SPGI) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

InnerWorkings has a long-term earnings growth expectation of 13.5%. It has beaten earnings estimates thrice in the trailing four quarters with an average positive earnings surprise of 24%.

MDC Partners has healthy long-term earnings growth expectation of 6%. It has beaten earnings estimates twice in the trailing four quarters with an average positive earnings surprise of 133.8%.

S&P Global has a long-term earnings growth expectation of 12.5%. It has beaten earnings estimates in each of the trailing four quarters with an average positive earnings surprise of 11.1%.

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