Enhabit, a home healthcare services provider, experienced a significant decrease in available funds from its revolving loans, resulting in a 29% drop in stock price. The shares reached an all-time low of $8.31 during early trading, reflecting a year-to-date decrease of over a third.
Limited Waiver with Wells Fargo
Enhabit announced on Monday that it has entered into a limited waiver agreement with Wells Fargo, acting as the administrative agent to other lenders under its credit agreement. This decision was made after the company potentially breached the stipulated total net leverage ratio during the third quarter. As a result, Enhabit sought to waive compliance with financial covenants for the subsequent required testing of its leverage on September 30.
Consequences of the Waiver
Under the terms of the waiver, Enhabit must certify its compliance with the waived financial covenants before the principal amount of revolving loans allowed under the agreement can be restored. Currently, the principal amount of revolving loans has been reduced from $350 million to $230 million.
Should Enhabit successfully meet the waived financial covenants, it will regain access to the original amount of revolving loans initially agreed upon.