In a recent development, American Vanguard Corp (NYSE:AVD), a prominent player in the agriculture chemicals sector, has entered into an amendment to its existing credit agreement. The amendment, dated March 12, 2025, involves significant changes to the company’s financial covenants and borrowing capacity. According to InvestingPro data, the company faces near-term challenges with negative earnings of -$1.03 per share over the last twelve months, though analysts expect a return to profitability this year with forecasted earnings of $0.73 per share.
The key adjustments include a modification of the Maximum Total Leverage Ratio, which is set at 6.25 for the periods ending March 31, 2025, and June 30, 2025. It will then decrease to 5.75 for the period ending September 30, 2025, and eventually revert to 3.25 for the periods from December 31, 2025, onwards. The Minimum Fixed Charge Coverage Ratio has also been altered to 1.15 for the period ending March 31, 2025, before returning to 1.25 for the period ending June 30, 2025, and subsequent periods. With a current ratio of 1.89 and a debt-to-equity ratio of 0.61, the company maintains reasonable financial flexibility despite these covenant adjustments.
Additionally, the amendment results in a reduction of the borrowing capacity under the revolving credit facility by $50 million through June 30, 2025, $40 million from July 1, 2025, to December 31, 2025, and $75 million from January 1, 2026, until the Revolver Commitment Termination Date. The company is also restricted from share repurchases, cash dividends, or making permitted acquisitions without lender consent.
The amendment includes a recalculation of Consolidated EBITDA to exclude certain expenses up to $50 million, related to discontinued operations of the company’s SIMPAS business and inventory write-downs. New allowances have been made for losses on asset sales, non-cash stock compensation, and extraordinary losses, among other items.
Interest rates under the credit agreement have been adjusted, with the Applicable Margin for SOFR Loans and Letter of Credit Fees set at 3.75%, for Adjusted Base Rate Loans at 2.75%, and the Unused Line Fee Rate at 0.35%. The company will also need to adhere to additional reporting requirements, including 13-week cash flow forecasts and monthly financial reporting obligations.
These changes reflect a strategic move by American Vanguard to restructure its financial commitments and maintain operational flexibility. The information is based on a press release statement and the full details of the amendment are incorporated by reference into the SEC filing. Despite current challenges, InvestingPro analysis suggests the company remains undervalued, with a strong free cash flow yield and a 29-year track record of maintaining dividend payments. For deeper insights into AVD’s valuation and future prospects, including additional ProTips and comprehensive financial analysis, investors can access the full Pro Research Report available on InvestingPro.
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