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Shares of Armtec Infrastructure Inc (ARF-T) rose as much as 23 percent on Monday, a day after the company said it has secured a $125 million credit facility from Brookfield Asset Management, that will allow it to repay lenders.
Last week, the Canadian infrastructure and construction materials company said it received a covenant waiver from its senior lenders and this reduced its revolving credit facility from $175 million to $130 million.
It was working with the lenders to amend the credit facilities so that it remained in compliance with its financial covenants.
"Not only does the new facility give the company a new lease on life, but it also frees up management time to tackle the operational difficulties," Raymond James analyst Frederic Bastien said in a note to clients.
Armtec, which was paying an annual dividend of $1.60 a share, suspended its quarterly dividend indefinitely and posted a wider quarterly loss, dragging its shares to a lifetime low in early June.
The first tranche of $90 million will be available upon finalization of appropriate documentation and the second tranche of $35 million will be granted after certain additional conditions are met, the company said in a statement.
Brookfield will get warrants to acquire about 4.56 million common shares of Armtec, at an exercise price which has a premium of 25 percent to Thursday's closing price.
"It is clear to us that Brookfield's financing comes at a price to Armtec shareholders, but we frankly see it as better for them than the alternative (that is, liquidation)," the analyst said.
Bastien, who upgraded the stock to "outperform" from "market perform," said "while these operating challenges are many, the stock's valuation has improved to a level where we feel comfortable supporting it again."
The new credit facility will have a term of two years and will be secured by a first charge on its assets, Armtec said in a statement.