MRC Global (MRC) Announces Actions to Strengthen Its Capital Structure

MRC Global Inc. (NYSE: MRC) announced today that it has agreed to repurchase all 363,000 shares of its 6.50% Series A Convertible Perpetual Preferred Stock as part of an agreement with Mario Investments, LLC, the holder of the preferred stock, which is contingent upon, among other things, the completion of a successful term loan financing.

Upon satisfaction of the required conditions in the repurchase agreement, the company will repurchase the preferred stock for a total payment of approximately $361 million, representing 99.5% of the liquidation preference of the preferred stock. The company will also pay accrued dividends through the closing date of the repurchase. MRC Global expects to finance the repurchase with a new senior secured term loan “B” (“Term Loan B”) and a combination of existing cash or borrowings from the company’s asset-based lending (“ABL”) facility.

Rob Saltiel, MRC Global President & CEO stated, “Our strong execution in recent years has strengthened our balance sheet, and in conjunction with increasingly consistent levels of cash generation, has positioned us to have the financial flexibility to pursue this opportunity now. We believe that repurchasing the preferred stock will simplify our capital structure and eliminate shareholder concerns about potential equity dilution through conversion of the preferred stock into common shares. We also expect that this repurchase will be accretive to both cash generation and earnings per share in 2025 and beyond based on current capital market conditions and anticipated financing terms”.

In order to finance the repurchase of the preferred stock, MRC Global is launching later today a $350 million Term Loan B financing with an expected term of seven years. The company is also pursuing an amendment to its ABL facility that would extend its term until 2029. Post-transaction, the company’s net debt leverage ratio is expected to be less than 2 times, based on the previous twelve months of adjusted EBITDA.

There can be no assurance that the company will be able to obtain the Term Loan B or amend the ABL facility, or what the ultimate terms of the facilities will be. The company's ability to enter into the Term Loan B and amend the ABL facility, and use the proceeds therefrom, depends on, among other things, market conditions, reaching final agreement with lenders and the approval of the company's board of directors.

In addition, the company is providing selected preliminary third quarter 2024 financial results.

Preliminary Third Quarter 2024 Financial Results
(All of the amounts set forth below are subject to finalization)

• Revenue of approximately $797 million
• Adjusted EBITDA of approximately $48 million, or 6.0% of sales
• Cash flow from operations of approximately $95 million

The company expects to release its full third quarter 2024 results on November 5, 2024, after the market close, as previously scheduled. The company will also hold a conference call to discuss its third quarter 2024 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on November 6, 2024, as previously scheduled.

Non-GAAP Measures

Reconciling the company’s preliminary third quarter 2024 Adjusted EBITDA (and the resulting Adjusted EBITDA percentage of sales) to the company’s preliminary third quarter net income is not reasonably possible as the company has not yet fully closed its third quarter books and there may be variations in income taxes, among other items, to determine net income. The company has estimated preliminary third quarter Adjusted EBITDA, even though the final net income numbers are not yet available, as the impact of items such as taxes are excluded by definition from Adjusted EBITDA. The company will provide a full reconciliation when it finalizes its books, releases its third quarter 2024 results and files its quarterly report on Form 10-Q for the quarter.

The company defines Adjusted EBITDA as net income plus interest, income taxes, depreciation and amortization, amortization of intangibles and certain other expenses, including non-cash expenses (such as equity-based compensation), plus or minus the impact of its last-in, first-out (LIFO) inventory costing methodology.

The company presents Adjusted EBITDA because the company believes Adjusted EBITDA is a useful indicator of the company’s operating performance. Among other things, Adjusted EBITDA measures the company’s operating performance without regard to certain non-recurring, non-cash or transaction-related expenses. Adjusted EBITDA, however, does not represent and should not be considered as an alternative to net income, cash flow from operations or any other measure of financial performance calculated and presented in accordance with GAAP. Because Adjusted EBITDA does not account for certain expenses, its utility as a measure of the company’s operating performance has material limitations. Because of these limitations, the company does not view Adjusted EBITDA in isolation or as a primary performance measure and also uses other measures, such as net income and sales, to measure operating performance.

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