Bigbear.ai Must Earn $1 in EBITDA to Maintain Access to Debt Facility
Lender expresses little confidence in artificial intelligence firm after cutting its revolver in half.
November 11, 2022
Three months after we warned of credit problems at Bigbear.ai, an artificial intelligence (AI) and machine learning platform, revealed new debt covenant violations resulting in a significant reduction in borrowing capacity. After Bigbear.ai ran afoul of its fixed charge coverage ratio (FCCR) requirement in the latest quarter, Bank of America cut the company’s revolver by half to $25 million.
Specifically, Bigbear.ai can now only draw between 85-90% of its outstanding receivables and the fees it pays have increased. However, the company must meet one important requirement before being allowed to access the revolver. In a testament to how bad conditions have become, Bigbear.ai disclosed:
“In order for the facility to become available for borrowings (the “initial availability quarter”), the Company must report Adjusted EBITDA of at least one dollar.”
The new terms require Bigbear.ai to earn the dollar of EBITDA over the two preceding quarters to maintain its ability to borrow under the revolver.
Notably, it does not appear Bank of America is ultra-confident Bigbear.ai can meet the standard as the lender says the inability to generate a dollar of EBITDA will not result in a default.
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