Enservco Corporation (ENSV) total bank debt would reduce from $33 million to almost $17 million. In addition, debt reduction would increase stockholders’ equity by approximately $17.5 million.
Shares of Enservco Corporation (ENSV) are trading above 50% in today’s trading session after the company announced that it has signed a non-binding letter of intent (LOI) with East West Bank (EWB) to make an amendment to its existing senior revolving credit facility, reducing ENSV’s bank debt by approximately $16 to $17 million.
Enservco surged up to 100% in premarket on Thursday followed by this recent announcement. EWB will amend the current facility into a term loan and provide a new working capital circulating line of credit in exchange for equity in the company.
On September 16, ENSV shares closed at $0.1274 and surged whoppingly in today’s premarket, kicking of the trading at $0.2243 in today’s opening. As of 3:13 P.M. EDT, the stock price had soared to almost 54% trading at $0.1959. Enservco shares touched today’s highest trading price of $0.2732 at 9:34 A.M.
Pursuant to LOI amendment, EWB will lower Enservco’s loan balance by almost $16 million in exchange for 8 million restricted common stock shares and 15 million common stock purchase warrants of the company.
The executive of Cross River Partners, Enservco’s largest shareholder, Rich Murphy said:
“We are delighted to announce this progress with East West Bank, which has been a great partner for us over the years and has worked diligently with us to improve the financial strength and viability of the Company during these challenging times.”
The company believes that reducing its total debt by half means that this development will bring a massive positive swing in stockholders’ equity. This would boost Enservco’s and its stockholders’ worth.
The current credit facility after amendment will reflect a new working capital revolving line of credit with no initial balance and a limit of $1 million and a term loan with a balance of almost $17 million. Both of the working capital and term loan will bear an annual interest rate of 8.25%, while 3% of that interest will be collected and paid on Oct 15, 2021, at maturity.
Enservco and EWB intend to close this debt restructuring in October 2020. The company will be able to resale its restricted common stock issued to EWB after the completion of stock registration in accordance with the SEC to be tradeable within six months. Whereas, the common stock warrants will be exercisable at a per common share price of $0.25, starting from Oct 21, 2021.
The company expects this financial move to turn out to be very substantial. After completion of this non-binding letter of intent, Enservco’s net debt would be lowered by almost 52%, based on the stats of its balance sheet as of June 30, 2020. On the other side, Enservco’s stockholders’ equity would increase approximately $17.5 million.
Enservco Corporation (ENSV) believes that the conversion of debt into equity will attract more investors in time to come, as this development reflects confidence in the future of ENSV’s business.