Item 1.01. Entry into a Material Definitive Agreement.
The information under Item 2.03 of this Current Report on Form 8-K is
incorporated by reference into this Item 1.01
Item 2.01. Completion of Acquisition or Disposition of Assets.
On August 27, 2021, the transactions contemplated by that certain Agreement and
Plan of Merger, dated as of June 28, 2021 (the "Merger Agreement"), by and among
Centuri Group, Inc. ("Centuri"), a wholly owned subsidiary of Southwest Gas
Holdings, Inc. (the "Company"), Electric T&D Holdings LLC, a wholly owned
subsidiary of Centuri (the "Buyer"), ETDH Merger Sub, Inc. ("Merger Sub" and
together with Centuri and the Buyer, the "Company Parties") and Drum Parent,
Inc. ("Drum") and OCM Drum Investors, L.P., as representative of certain
stockholders and option holders of Drum (together with Drum, the "Seller
Parties") were completed. Pursuant to the Merger Agreement, Merger Sub will
merge with and into Drum with Drum surviving as a wholly owned subsidiary of the
Buyer (the "Merger"). As consideration for the Merger, Centuri paid an aggregate
of $855 million in cash to the stockholders of Drum, subject to certain
Drum is the parent company of Riggs Distler & Company Inc. ("Riggs Distler"), an
electric services contracting company with major investor-owned electric utility
customers in the Northeast and Mid-Atlantic regions, providing unionized
installation and repair services to these utility customers. As a result of the
Merger, Riggs Distler has become an indirect wholly owned subsidiary of Centuri.
Centuri financed the purchase price with proceeds from the Term Loan Facility
(as defined below under Item 2.03).
The foregoing description of the Merger Agreement and the transactions
contemplated thereby is not complete and is subject to and qualified in its
entirety by reference to the full text of the Merger Agreement, which was
previously filed as Exhibit 2.1 to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission (the "SEC") on June 29, 2021
and is incorporated by reference herein.
Important Statement regarding the Merger Agreement. The Merger Agreement has
been included to provide investors with information regarding terms of the
Merger. It is not intended to provide any other factual information about the
Company, Centuri, Drum, OCM Drum Investors, L.P. or their respective
subsidiaries or affiliates. The representations, warranties, and covenants
contained in the Merger Agreement were made only for purposes of the Merger
Agreement and as of specific dates, were solely for the benefit of the parties
to the Merger Agreement, may be subject to limitations, qualifications or other
particulars agreed upon by the contracting parties, including being qualified by
confidential disclosures made for the purposes of allocating contractual risk
between the parties to the
Merger Agreement instead of establishing these matters as facts or made for
other purposes, and may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to investors. Investors
are not third-party beneficiaries under the Merger Agreement and should not rely
on the representations, warranties, and covenants or any descriptions thereof as
characterizations of the actual state of facts or condition of the parties
thereto or any of their respective subsidiaries or affiliates. Moreover,
information concerning the subject matter of representations and warranties may
change after the date of the Merger Agreement, which subsequent information may
or may not be fully reflected in the Company's public disclosures.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On August 27, 2021, Centuri and Centuri Canada Division Inc. (collectively, the
"Borrowers") entered into a second amended and restated credit agreement (the
"Credit Agreement") with Wells Fargo Securities, LLC and BofA Securities, Inc.,
as joint lead arrangers, Wells Fargo Bank, National Association, as
administrative agent, Bank of America, N.A., as syndication agent, and the other
lenders and agents party thereto. The Credit Agreement provides for a
$1.145 billion term loan "B" facility (the "Term Loan Facility") and a
$400 million revolving credit facility (the "Revolving Credit Facility").
Subject to certain conditions, the capacity under the Term Loan Facility and the
Revolving Credit Facility may be increased at Centuri's option by an aggregate
amount of up to the greater of (1) $300 million and Consolidated EBITDA as of
the most recently ended four fiscal quarter period plus (2) an amount which,
after giving pro forma effect to such increase, would not cause Centuri's net
leverage ratio to exceed 4.00 to 1.00. The obligations under the Credit
Agreement are secured by present and future ownership interests in substantially
all direct and indirect subsidiaries of Centuri, substantially all of the
tangible and intangible personal property of each Borrower and certain of their
direct and indirect subsidiaries (collectively, the "Guarantors"), and all
products, profits and proceeds of the foregoing, and are guaranteed by the
Guarantors. The Term Loan Facility matures on August 27, 2028 and the Revolving
Credit Facility matures on August 27, 2026.
At Centuri's option, interest rates for the Term Loan Facility and the Revolving
Credit Facility are based on either a "base rate" or LIBOR, plus an applicable
margin in either case. The Term Loan Facility is also subject to a LIBOR floor
of 0.50%. Furthermore, Centuri Canada Division Inc. may borrow under the
Revolving Credit Facility with interest rates based on either a "base rate" or
CDOR plus the applicable margin, at the Borrower's option. The margin for the
Term Loan Facility will be 1.50% for base rate loans and 2.50% for LIBOR loans.
The margin for the Revolving Credit Facility ranges from 0.0% to 1.25% for base
rate loans and from 1.00% to 2.25% for LIBOR loans, depending on Centuri's net
The Credit Agreement contains certain customary representations and warranties,
affirmative and negative covenants and events of default. There are no financial
covenants related to the Term Loan Facility. The Revolving Credit Facility
requires Centuri to (i) maintain a maximum total net leverage ratio of 5.50 to
1.00 with a step-down to 4.75 to 1.0 on December 31, 2022 and a step-down to
4.00 to 1.00 on December 31, 2023; provided, however, Centuri may elect to
increase the maximum total net leverage ratio up to 4.50 to 1.00 in connection
with certain material acquisitions, which such increase shall be applicable for
one year following the acquisition and (ii) maintain a minimum interest coverage
ratio of 2.50 to 1.00.
Subject to certain exceptions, amounts outstanding under the Credit Agreement
are required to be prepaid with (i) 100% of the net cash proceeds of the
issuance or incurrence of debt by Centuri or any of its subsidiaries, (ii) 100%
of the net cash proceeds of all non-ordinary course asset sales, insurance and
condemnation recoveries and other asset dispositions by Centuri or any of its
subsidiaries and (iii) 50% of the excess cash flow for each fiscal year of
Centuri commencing with the fiscal year ending December 31, 2022, subject to
100% credit for any voluntary prepayments of the loans under the Credit
Agreement and with a step down to 25% if Centuri's total net leverage ratio is
less than 4.00 to 1.00 but greater than 3.50 to 1.00 and 0% if Centuri's total
net leverage ratio is less than or equal to 3.50 to 1.0. All mandatory
prepayments will be allocated first to amounts outstanding under the Term Loan
Facility and second to amounts outstanding under the Revolving Credit Facility.
On August 27, 2021, Centuri made borrowings of $1.145 billion under the Term
Loan Facility and Centuri Canada Division Inc. made borrowings of C$145 million
under the Revolving Credit Facility in order (i) to finance the consideration
payable under the Merger Agreement and to pay related fees and expenses, (ii) to
amounts outstanding under Centuri's existing credit facility and certain
indebtedness of Riggs Distler and its subsidiaries, and (iii) for other general
corporate purposes. Any future borrowings under the Revolving Credit Facility
will be used to refinance existing indebtedness and for working capital and
other general corporate purposes.
The foregoing description of the Credit Agreement is not complete and is
qualified in its entirety by reference to the text of the Credit Agreement,
which is filed as Exhibit 10.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The required historical financial statements of Drum Parent will be filed by an
amendment to this Current Report on Form 8-K within 71 calendar days of the due
(b) Pro Forma Financial Information
The required unaudited pro forma financial information of the Company will be
filed by an amendment to this Current Report on Form 8-K within 71 calendar days
of the due date hereof.
2.1* Merger Agreement, dated as of June 28, 2021, by and among Centuri
Group, Inc., Electric T&D Holdings LLC, ETDH Merger Sub, Inc., Drum
Parent, Inc. and OCM Drum Investors, L.P (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K filed on
June 29, 2021).
10.1 Credit Agreement with Wells Fargo Securities, LLC and BofA
Securities, Inc., as joint lead arrangers, Wells Fargo Bank, National
Association, as administrative agent, Bank of America, N.A., as
syndication agent, and the other lenders and agents party thereto.
104 Cover Page formatted in Inline XBRL.
* The Company has omitted schedules and other similar attachments to such
agreement pursuant to Item 601(b) of Regulation S-K. The Company will furnish a
copy of such omitted document to the SEC upon request.
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