Commercial Vehicle Group Inc. (NASDAQ:CVGI) Q1 2020 Earnings Conference Call - Final Transcript
May 19, 2020 • 08:00 am ET
Thank you. [Operator Instructions] Your first question comes from Mike Shlisky of Dougherty & Company. Your line is open.
Good morning, guys.
Harold C. Bevis
Hi. Can I get a little more color on the debt restructuring that you did? I just want to make sure I get what triggered all of it. I guess, I'm curious, did you actually trip any covenants during Q2 or did you feel like -- right now your forecast is to actually trip something during Q2 or was it more a forecast later this year that made you concerned and you were asked to go get that if that altered? And also, can you tell us directly which covenants you were most worried about and what the exact new covenants are as far as the numbers are concerned?
C. Timothy Trenary
So, Mike, we have been and continue to be in full compliance with the Company's credit agreements. So, there was no event of default. As we -- two months ago, the middle of March, very clear-eyed, this management team looked into the second quarter, and it was clear that we were going to experience some earnings compression. We have, in the term loan agreement, a leverage ratio covenant that must be maintained -- it was 4.75 times trailing-12 months EBITDA. And it was clear that beginning in the second quarter, it was going to be tight, all right.
So, in anticipation of that and looking out into the future and not knowing for sure what was going to transpire over the next few months, we entered into discussions with the lenders and successfully concluded an agreement to the -- amendment to the term loan agreement that provides for the suspension of that leverage ratio covenant for the remainder of this year. So, Q2, Q3, Q4, the Company does not have to maintain any certain leverage ratio.
Beginning in the first quarter of 2021 and continuing through the third quarter of 2021, that leverage ratio has been set at a higher level. Beginning in the first quarter of 2021, it is set at 12 times trailing-12 months EBITDA and then steps down to 4.75 times in the fourth quarter of 2021. So, the objective here was to provide the Company with the flexibility in the near term, given the earnings compression to continue to be in compliance with the loan agreements. In return, we have agreed to a minimum liquidity covenant as well as a number of other restrictions on certain uses of our cash flow and also some increased pricing to the note holders.
Yes. As far as the increased pricing goes, I know you don't want to give guidance for the entire Company and the quarter and all, but what do you think the approximate interest costs for quarter will be going forward based on the current debt levels?
C. Timothy Trenary
All right, so, the -- just by way of background here, so I can get you maybe a level set just to make sure we're talking about the