WM Argyle Fund calls Broadwind loan default ‘indefensible for management’

WM Argyle Fund, an investment fund which recently announced its nomination of six independent director candidates to the Board of Directors of Broadwind, commented on a Form 8-K filed by the Company with the Securities and Exchange Commission on February 14th, 2023. In the Form 8-K, the Company disclosed that it amended a Credit Agreement after failing to meet the lender’s minimum EBITDA threshold of $2.5M for the twelve month period ended December 31, 2022, which created an event of default under the Credit Agreement. The Fund said, "The filing indicates the Company’s EBITDA projections in August, when it entered into the Credit Agreement, did not last four months. We find it hard to believe the Company would knowingly agree to debt covenants it could not meet, which therefore suggests its projected financial performance declined in Q4. We find the loan default and the reductions in Q1 and Q2 2023 quarterly EBITDA covenants in the amended loan agreement to be indefensible for management and the Board. We are asking that management and the Board publicly explain to stockholders how this happened and what they are planning to do to address the causes for this default. Getting loan waivers is only a bandage to cover the much greater wound the Company is facing in credibility with lenders and shareholders. We hope last week’s filing is not a prelude to reporting further declines in its Q4 operating performance or future guidance. Broadwind has great potential, but stockholders deserve a board that will hold management accountable for its repeated failure to achieve growth and profitability."