PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 780 Third Avenue, New York, NY 10017
MEMORANDUM
To: Philip Hartmann, Partner, Banking & Finance
From: Marcus Leung, Associate, Banking & Finance
Reviewed by: Lisa Morrow, Associate, Banking & Finance
Date: January 28, 2026
Re: Whitmore Aerospace LLC — Pro Forma Financial Covenant Compliance Analysis ($450,000,000 Senior Secured Revolving Credit Facility)
Matter No.: 1019-00002
CUSIP: 96438LAA3
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I. Executive Summary
The purpose of this memorandum is to analyze the pro forma compliance of Whitmore Aerospace LLC ("WAL" or the "Borrower") with each of the three financial maintenance covenants contained in the $450,000,000 Senior Secured Revolving Credit Agreement dated as of January 30, 2026 (the "Credit Agreement"), based on FY2025 financial data for the fiscal year ending December 31, 2025. This analysis is intended to provide the engagement team with a comprehensive assessment of the Borrower's financial covenant profile as of the anticipated initial funding date and to identify potential areas of concern warranting ongoing monitoring.
The Credit Agreement is entered into among (i) WAL, as Borrower; (ii) the Subsidiary Guarantors, consisting of Whitmore Propulsion Systems, Inc. ("WPS"), Whitmore Avionics Holdings LLC ("WAH"), Whitmore Defense Solutions, Inc. ("WDS"), and Whitmore Precision Machining LLC ("WPM"); (iii) the Lenders, consisting of Prescott National Bank, N.A. ("Prescott"), Harborview Trust Company ("Harborview"), Meridian Commercial Lending Corp. ("Meridian"), Atlas Fidelity Bank ("Atlas"), and Commonwealth Capital Markets, Inc. ("Commonwealth"); and (iv) Prescott National Bank, N.A., acting in its capacities as Administrative Agent, Collateral Agent, and Swingline Lender.
The Credit Agreement is governed by the laws of the State of New York. The financial maintenance covenants set forth therein are tested on a quarterly basis, calculated on a trailing four-quarter (last twelve months, or "LTM") basis as of the last day of each fiscal quarter.
The new facility refinances the existing $210,000,000 Senior Secured Term Loan dated March 15, 2021 between WAL and Prescott National Bank, N.A. (the "Existing Facility"). The Existing Facility will be fully retired upon the initial draw under the Credit Agreement. The estimated payoff amount for the Existing Facility as of the anticipated March 1, 2026 initial draw date is $169,312,500, inclusive of accrued but unpaid interest. The pro forma analysis presented herein assumes full refinancing of the Existing Facility and net pro forma total funded debt of $450,000,000 (representing full draw of the revolving credit commitment for purposes of a conservative compliance assessment).
The following table summarizes the results of the pro forma financial covenant compliance analysis:
Based on the analysis set forth in detail below, WAL is in full pro forma compliance with all three financial maintenance covenants as of December 31, 2025. Supplemental sensitivity analysis under various stress scenarios — including elevated drawn balances, rising SOFR rates, EBITDA declines, and combined adverse conditions — is presented in Section VII of this memorandum to assist the engagement team in assessing the robustness of the Borrower's compliance posture.
II. Sources of Financial Data
The financial data and assumptions underlying this pro forma compliance analysis are derived from the following sources:
Audited Financial Statements. The consolidated financial statements of WAL for FY2025 (fiscal year ended December 31, 2025) serve as the primary source of financial data for this analysis. These financial statements were audited by Grayson Tidwell & Associates LLP, an independent registered public accounting firm headquartered in McLean, Virginia. The engagement partner for the FY2025 audit was Catherine Llewellyn, CPA. Grayson Tidwell has served as WAL's independent auditor since fiscal year 2020 and has issued an unqualified opinion on each set of annual financial statements during that period. The audited financial statements were prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and present the consolidated financial position, results of operations, and cash flows of WAL and its subsidiaries.
Management Representations. Certain financial data, including the computation of Adjusted EBITDA and the confirmation of the absence of material funded indebtedness outside the Credit Agreement, were provided by Sandra Petrova, Chief Financial Officer of WAL. Ms. Petrova's representations were received via electronic communication dated January 22, 2026, and have been relied upon without independent verification by this firm. Ms. Petrova has confirmed that the figures presented are consistent with the audited financial statements and that no material changes to the Borrower's financial condition have occurred between December 31, 2025 and the date of this memorandum.
Pro Forma Adjustments. Pro forma adjustments to funded debt levels, interest expense, and other relevant metrics are derived from the terms and conditions of the Credit Agreement as negotiated and from the payoff mechanics applicable to the Existing Facility. The payoff amount for the Existing Facility has been estimated based on the outstanding principal balance, applicable interest rate, and anticipated payoff date.
Interest Rate Assumptions. Interest expense estimates are based on assumed Secured Overnight Financing Rate ("SOFR") rate environments, the applicable credit spread under the Credit Agreement (350 basis points), and assumed facility utilization levels. The SOFR rate as of the date of this analysis is approximately 4.60%, as published by the Federal Reserve Bank of New York. Actual interest expense will vary based on prevailing SOFR rates, actual borrowing dates, and actual facility utilization.
Capital Expenditure Data. Capital expenditure figures are sourced from WAL's FY2025 audited consolidated financial statements, specifically the consolidated statement of cash flows and the related notes to the financial statements concerning property, plant, and equipment.
Consolidated Basis. All figures presented herein are on a consolidated basis, encompassing WAL and all Subsidiary Guarantors (WPS, WAH, WDS, and WPM), consistent with the financial reporting and covenant testing requirements of the Credit Agreement. Intercompany transactions and balances have been eliminated in consolidation in accordance with GAAP.
III. Summary of Financial Covenant Requirements
The Credit Agreement contains three financial maintenance covenants, each of which must be satisfied as of the last day of each fiscal quarter (with testing occurring upon delivery of the quarterly or annual Compliance Certificate by the Borrower's Chief Financial Officer). The requirements of each covenant are summarized below.
A. Maximum Total Leverage Ratio
Covenant Requirement. The ratio of Total Funded Debt to Consolidated EBITDA (the "Total Leverage Ratio") shall not exceed 3.75 to 1.00 as of the last day of any fiscal quarter. The Total Leverage Ratio is tested quarterly, calculated on a trailing four-quarter (LTM) basis.
Definition of Total Funded Debt. As defined in the Credit Agreement, "Total Funded Debt" means, as of any date of determination, the aggregate outstanding principal amount of all indebtedness for borrowed money of the Borrower and its Restricted Subsidiaries on a consolidated basis, determined in accordance with GAAP, including without limitation: (i) all outstanding principal under the Credit Agreement, including revolving loans, swingline loans, and any drawn but unreimbursed letters of credit; (ii) all other indebtedness for borrowed money, whether secured or unsecured; (iii) the principal component of all obligations in respect of capital leases (as classified under GAAP as in effect on the Closing Date, subject to any agreed "frozen GAAP" provisions); and (iv) all purchase money obligations. Total Funded Debt excludes undrawn letters of credit, contingent obligations that have not become fixed, and hedging obligations.
Definition of Consolidated EBITDA. As defined in the Credit Agreement, "Consolidated EBITDA" means, for any period of determination, the consolidated net income of the Borrower and its Restricted Subsidiaries for such period, plus, to the extent deducted in computing consolidated net income: (a) consolidated interest expense; (b) provision for income taxes (including federal, state, local, and foreign); (c) depreciation expense; (d) amortization expense (including amortization of intangibles and deferred financing costs); (e) non-cash charges, expenses, and losses (excluding any non-cash charge that represents an accrual of, or reserve for, cash charges in any future period); and (f) certain transaction-related add-backs, including fees and expenses incurred in connection with the closing of the Credit Agreement, permitted acquisitions, and other permitted transactions, in each case subject to any caps specified in the Credit Agreement; minus (g) non-cash income items to the extent included in consolidated net income (excluding any non-cash item of income that represents the reversal of an accrual or reserve for a potential cash item that was excluded from Consolidated EBITDA in a prior period).
Pro Forma Testing. Pro forma compliance with the Total Leverage Ratio is required in connection with the initial funding under the Credit Agreement, as well as in connection with any future permitted acquisitions, material asset dispositions, or incremental facility draws, in each case giving effect to such transaction on a pro forma basis as if it had occurred on the first day of the applicable LTM measurement period.
B. Minimum Interest Coverage Ratio
Covenant Requirement. The ratio of Consolidated EBITDA to Consolidated Interest Expense (the "Interest Coverage Ratio") shall not be less than 3.00 to 1.00 as of the last day of any fiscal quarter. The Interest Coverage Ratio is tested quarterly, calculated on a trailing four-quarter (LTM) basis.
Definition of Consolidated Interest Expense. As defined in the Credit Agreement, "Consolidated Interest Expense" means, for any period of determination, the aggregate of all cash and non-cash interest, premium payments, fees, charges, and related expenses incurred by the Borrower and its Restricted Subsidiaries on a consolidated basis in connection with indebtedness for borrowed money (including, without limitation, commitment fees on unused commitments, letter of credit participation fees and fronting fees, and amortization of original issue discount and deferred financing costs), but excluding (i) one-time fees and expenses incurred in connection with the closing of the Credit Agreement or the refinancing of the Existing Facility, and (ii) any amounts constituting a "default rate" premium (which shall be excluded for purposes of ongoing covenant testing during the pendency of any cure period, but included thereafter).
Pro Forma Adjustments. Pro forma adjustments to Consolidated Interest Expense are required for any changes in the debt level of the Borrower and its Restricted Subsidiaries occurring during the applicable LTM measurement period, such that interest expense is calculated as if the current debt level (after giving effect to any new borrowing or repayment) had been in effect for the entire measurement period.
C. Maximum Capital Expenditures
Covenant Requirement. The aggregate capital expenditures of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, shall not exceed $45,000,000 in any fiscal year (the "CapEx Cap").
Carry-Forward Provision. To the extent that actual capital expenditures in any fiscal year are less than the CapEx Cap, up to fifty percent (50%) of the unused amount from the immediately preceding fiscal year may be carried forward and added to the CapEx Cap for the next succeeding fiscal year. The maximum amount of any carry-forward shall not exceed $22,500,000 (calculated as 50% × $45,000,000 = $22,500,000). Carry-forward amounts are available only for the immediately succeeding fiscal year and do not accumulate beyond one annual period.
Exclusions. The CapEx Cap excludes capital expenditures that are funded with (i) insurance proceeds received in connection with a casualty event, or (ii) condemnation awards or similar payments received in connection with a taking or threatened taking of property. All other expenditures that are required to be capitalized under GAAP are included within the scope of the covenant.
IV. Pro Forma Total Leverage Ratio Analysis
A. Calculation of Pro Forma Total Funded Debt
New Facility Commitment Structure. The Credit Agreement provides for aggregate commitments of $450,000,000, structured as follows:
(i) Revolving Credit Commitment: $400,000,000, available to the Borrower as revolving credit loans on a revolving basis through the Maturity Date (January 30, 2031), with mandatory repayment and reborrowing provisions as set forth in the Credit Agreement;
(ii) Swingline Sub-Facility: $25,000,000, constituting a sub-limit within the aggregate revolving credit commitment (and not in addition thereto), available for same-day or next-day funding of short-term working capital needs, provided by Prescott National Bank, N.A. in its capacity as Swingline Lender; and
(iii) Letter of Credit Sub-Facility: $50,000,000, constituting a sub-limit within the aggregate revolving credit commitment (and not in addition thereto), available for the issuance of standby and commercial letters of credit for the account of the Borrower.
Retirement of the Existing Facility. The Existing Facility, a $210,000,000 senior secured term loan dated March 15, 2021 between WAL and Prescott National Bank, N.A., will be fully retired upon the initial draw under the Credit Agreement. The relevant payoff mechanics are as follows:
• Original principal amount: $210,000,000
• Outstanding principal balance after cumulative scheduled amortization payments of $41,250,000: $168,750,000
• Estimated payoff amount as of the anticipated March 1, 2026 initial draw date: $169,312,500, consisting of (a) outstanding principal of $168,750,000 and (b) estimated accrued but unpaid interest of approximately $562,500 (based on the Existing Facility interest rate of SOFR + 275 basis points and estimated accrual from the most recent interest payment date)
• The Existing Facility interest rate is Adjusted Term SOFR plus 275 basis points, with a SOFR floor of 0.50%
Pro Forma Funded Debt Calculation. For purposes of this pro forma compliance analysis, Total Funded Debt is calculated on the assumption that the full $450,000,000 commitment under the Credit Agreement is drawn at the initial funding date. This represents a conservative approach, as actual initial utilization may be lower. The net proceeds of the initial draw will be applied as follows: (a) first, to pay off the Existing Facility in full ($169,312,500, inclusive of accrued interest); (b) second, to pay closing costs, fees, and expenses incurred in connection with the Credit Agreement (estimated at approximately $4,500,000, inclusive of arrangement fees, legal fees, due diligence costs, and recording fees); and (c) third, the remaining balance to be held by the Borrower for working capital and general corporate purposes.
It is important to note that the Existing Facility is fully retired as part of this refinancing and is therefore not additive to the new facility for purposes of calculating Total Funded Debt. Pro forma Total Funded Debt following the refinancing is $450,000,000.
WAL management has confirmed that there is no other material funded indebtedness of the Borrower or any Subsidiary Guarantor outstanding outside of the Credit Agreement. Specifically, Ms. Petrova has represented that as of the date of this memorandum: (i) there are no outstanding capital lease obligations in excess of $500,000 individually or $2,000,000 in the aggregate; (ii) there are no purchase money obligations in excess of $1,000,000; and (iii) there are no other credit facilities, notes payable, or other instruments of indebtedness for borrowed money. Accordingly, pro forma Total Funded Debt is set at $450,000,000 for purposes of this analysis.
B. Consolidated EBITDA
The Borrower's consolidated financial performance for FY2025 (fiscal year ended December 31, 2025), as reflected in the audited financial statements and as supplemented by management representations, is summarized as follows:
• Consolidated Revenue (FY2025): $612,000,000
• Consolidated Adjusted EBITDA (FY2025): $138,000,000
The Adjusted EBITDA figure of $138,000,000 represents the LTM Consolidated EBITDA for the trailing four fiscal quarters ended December 31, 2025. This figure has been computed by WAL management in accordance with the definition of Consolidated EBITDA set forth in the Credit Agreement, including all applicable add-backs (transaction-related expenses, non-cash charges, stock-based compensation) and deductions (non-cash income items). The resulting EBITDA margin for FY2025 is approximately 22.5% ($138M / $612M), which is consistent with WAL's historical EBITDA margins in the 21-24% range observed over the preceding three fiscal years.
It should be noted that the $138,000,000 Adjusted EBITDA figure is subject to final reconciliation against the specific defined terms of the Credit Agreement. The management-provided figure has been used for purposes of this analysis, and any variance resulting from a strict application of the Credit Agreement definitions (e.g., differences in the treatment of specific add-back categories or in the application of any add-back caps) could result in a modestly different Consolidated EBITDA figure. The engagement team should confirm the final Consolidated EBITDA calculation in connection with the preparation of the initial Compliance Certificate.
C. Pro Forma Leverage Calculation
Based on the foregoing, the pro forma Total Leverage Ratio is calculated as follows:
Pro Forma Total Leverage Ratio = Total Funded Debt ÷ Consolidated EBITDA
Pro Forma Total Leverage Ratio = $450,000,000 ÷ $138,000,000 = approximately 3.26x
Covenant Requirement: Total Leverage Ratio shall not exceed 3.75 to 1.00.
Result: The pro forma Total Leverage Ratio of approximately 3.26x is below the 3.75x maximum covenant level. WAL is in compliance with the Maximum Total Leverage Ratio covenant on a pro forma basis.
Headroom Analysis. The headroom between the pro forma leverage ratio (3.26x) and the covenant maximum (3.75x) is 0.49x. In absolute dollar terms, this headroom translates to approximately $67,500,000 of additional funded debt capacity before the leverage covenant would be reached at current EBITDA levels, calculated as follows:
Maximum Total Funded Debt at current EBITDA: $138,000,000 × 3.75 = $517,500,000
Headroom in dollar terms: $517,500,000 − $450,000,000 = $67,500,000
Accordion / Incremental Facility Observation. The Credit Agreement permits up to $100,000,000 in incremental revolving or term commitments (the "Accordion"), subject to the conditions discussed in Section VIII below. At current EBITDA levels, a full $100,000,000 accordion draw — bringing total funded debt to $550,000,000 — would result in a leverage ratio of $550,000,000 / $138,000,000 = approximately 3.99x, which would exceed the 3.75x covenant maximum. Accordingly, the maximum incremental draw that is consistent with covenant compliance at current EBITDA levels is approximately $67,500,000. This constraint should be communicated to the client in connection with any future discussions regarding accordion exercises.
V. Pro Forma Interest Coverage Ratio Analysis
A. Estimation of Pro Forma Consolidated Interest Expense
For purposes of the pro forma Interest Coverage Ratio analysis, Consolidated Interest Expense has been estimated based on the following assumptions:
Assumed Average Drawn Balance. The analysis assumes an average drawn balance under the new facility of $350,000,000 during the measurement period. This is a conservative assumption that reflects partial utilization of the $400,000,000 revolving credit commitment and the $25,000,000 swingline sub-facility. While the leverage ratio analysis (Section IV) assumed a full $450,000,000 draw for purposes of conservatism in that context, the interest coverage analysis employs a $350,000,000 average drawn balance as a more realistic reflection of expected ongoing facility utilization. A full-draw interest coverage scenario is separately presented in the sensitivity analysis (Section VII.C).
Applicable Interest Rate. Borrowings under the Credit Agreement bear interest at Adjusted Term SOFR plus an applicable margin of 350 basis points. The Credit Agreement specifies a SOFR floor of 0.00%, which is not material at current SOFR levels but would become relevant in a near-zero or negative rate environment.
• Assumed SOFR rate (as of the date of this analysis): approximately 4.60%
• Applicable margin: 350 basis points (3.50%)
• All-in interest rate: 4.60% + 3.50% = 8.10%
Estimated Annual Interest on Drawn Balance. Based on the foregoing assumptions:
Estimated annual interest expense = $350,000,000 × 8.10% = $28,350,000, rounded to approximately $28,400,000
Additional Fee Components. Consistent with the definition of Consolidated Interest Expense in the Credit Agreement, the following additional fees and charges are included in the interest expense calculation:
• Commitment fee on unused revolving commitment: The Credit Agreement provides for a commitment fee of 50 basis points per annum on the daily average unused portion of the revolving credit commitment, payable quarterly in arrears. Assuming an average drawn balance of $350,000,000 against the $400,000,000 revolving commitment, the average unused commitment is approximately $50,000,000. The resulting annual commitment fee is approximately $50,000,000 × 0.50% = $250,000 per annum.
• Annual administrative agent fee: Prescott National Bank, N.A. receives an annual administrative agent fee of $175,000, payable in accordance with the separate fee letter between the Borrower and the Administrative Agent.
• Letter of credit fees and fronting fees: The Credit Agreement provides for LC participation fees equal to 350 basis points per annum on the aggregate undrawn face amount of all outstanding letters of credit and a fronting fee of 12.5 basis points per annum payable to the issuing bank. As of the date of this analysis, WAL has not indicated any material letters of credit expected to be outstanding under the facility in the near term. Accordingly, LC fees are not material for purposes of this base case analysis and have been excluded.
Total Estimated Pro Forma Consolidated Interest Expense. Taking into account the interest on the assumed drawn balance, the commitment fee, and the agent fee, total estimated pro forma Consolidated Interest Expense is approximately $28,400,000 (inclusive of rounding and minor fee components). This figure is used as the denominator in the interest coverage ratio calculation below. The engagement team should note that this estimate is an approximation; actual Consolidated Interest Expense will depend on the actual timing and amounts of borrowings and repayments, prevailing SOFR rates on each interest determination date, actual LC utilization, and other factors.
B. Pro Forma Interest Coverage Calculation
Based on the foregoing, the pro forma Interest Coverage Ratio is calculated as follows:
Pro Forma Interest Coverage Ratio = Consolidated EBITDA ÷ Consolidated Interest Expense
Pro Forma Interest Coverage Ratio = $138,000,000 ÷ $28,400,000 = approximately 4.86x
Covenant Requirement: Interest Coverage Ratio shall not be less than 3.00 to 1.00.
Result: The pro forma Interest Coverage Ratio of approximately 4.86x exceeds the 3.00x minimum covenant level. WAL is in compliance with the Minimum Interest Coverage Ratio covenant on a pro forma basis.
Headroom Analysis. The headroom between the pro forma interest coverage ratio (4.86x) and the covenant minimum (3.00x) is 1.86x. This represents substantial cushion, indicating that the Borrower's earnings capacity significantly exceeds the level required to service its estimated interest obligations under the Credit Agreement. In dollar terms, EBITDA could decline by approximately $53,200,000 (a decline of approximately 38.6% from the current $138,000,000) before the interest coverage covenant would be breached at current interest expense levels, calculated as follows:
Breakeven EBITDA for interest coverage: $28,400,000 × 3.00 = $85,200,000
EBITDA decline capacity: $138,000,000 − $85,200,000 = $52,800,000 (approximately 38.3%)
The interest coverage ratio accordingly provides WAL with a meaningful buffer against adverse business conditions, rising interest rates, or a combination thereof. The sensitivity analysis in Section VII explores these scenarios in greater detail.
VI. Capital Expenditure Covenant Analysis
A. FY2025 Actual Capital Expenditures
Per the audited consolidated financial statements of WAL for FY2025, the Borrower and its Restricted Subsidiaries incurred aggregate capital expenditures of $38,200,000 during the fiscal year ended December 31, 2025. This figure includes all amounts capitalized under GAAP, including additions to property, plant, and equipment, leasehold improvements, and capitalized software development costs. No amounts within the FY2025 capital expenditure total were funded with insurance proceeds or condemnation awards, and accordingly no exclusions from the CapEx Cap are applicable.
Covenant Requirement: Maximum annual capital expenditures of $45,000,000.
Result: FY2025 capital expenditures of $38,200,000 are below the $45,000,000 annual cap by $6,800,000. WAL is in compliance with the Maximum Capital Expenditures covenant for FY2025.
The FY2025 capital expenditure level of $38,200,000 represents approximately 84.9% of the $45,000,000 annual cap and approximately 6.2% of FY2025 consolidated revenue. This level of capital spending is consistent with WAL's historical capital expenditure patterns and reflects the Borrower's ongoing investment in manufacturing equipment, facility improvements, and technology infrastructure across its operating subsidiaries.
B. Carry-Forward Calculation
The Credit Agreement permits a carry-forward of unused capital expenditure allowance from one fiscal year to the immediately succeeding fiscal year, subject to a carry-forward cap of 50% of the annual CapEx Cap. The carry-forward calculation for FY2026 is as follows:
• Unused FY2025 CapEx allowance: $45,000,000 − $38,200,000 = $6,800,000
• Carry-forward cap (50% of $45,000,000): $22,500,000
• Carry-forward amount available for FY2026: lesser of $6,800,000 and $22,500,000 = $6,800,000
Accordingly, the effective capital expenditure limit for FY2026, inclusive of the carry-forward amount, is:
FY2026 Effective CapEx Limit: $45,000,000 + $6,800,000 = $51,800,000
WAL management has indicated that the Borrower's preliminary FY2026 capital expenditure budget is approximately $42,000,000. This anticipated spending level is well within the effective FY2026 limit of $51,800,000, providing approximately $9,800,000 of headroom against the effective cap ($51,800,000 − $42,000,000 = $9,800,000) and $3,000,000 of headroom against the baseline annual cap of $45,000,000 ($45,000,000 − $42,000,000 = $3,000,000). The engagement team should continue to monitor actual capital expenditure levels as they are reported quarterly to ensure ongoing compliance and to assess the availability of carry-forward amounts for future periods.
VII. Sensitivity Analysis
To assess the resilience of WAL's financial covenant compliance posture under adverse conditions, we have performed sensitivity analyses across several key variables, including drawn balance levels, SOFR rate movements, combined stress scenarios, and EBITDA declines. The results of each analysis are presented below.
A. Leverage Ratio Sensitivity — Varying Drawn Balances
The following table illustrates the pro forma Total Leverage Ratio at various drawn balance levels, all assuming Consolidated EBITDA of $138,000,000:
Key Observation. Full utilization of the $100,000,000 accordion capacity (bringing total funded debt to $550,000,000) would result in a leverage ratio of approximately 3.99x, which exceeds the 3.75x covenant maximum. The leverage covenant would be breached at that level unless Consolidated EBITDA grows to at least approximately $146,700,000 ($550,000,000 / 3.75 = $146,666,667, rounded). The maximum amount of total funded debt that is consistent with the leverage covenant at current EBITDA levels is approximately $517,500,000 ($138,000,000 × 3.75), leaving approximately $67,500,000 of incremental funded debt capacity.
B. Interest Coverage Sensitivity — Varying SOFR Rates
The following table illustrates the pro forma Interest Coverage Ratio at various SOFR rate levels, assuming an average drawn balance of $350,000,000 and Consolidated EBITDA of $138,000,000:
Key Observation. At the assumed $350,000,000 average drawn balance and $138,000,000 EBITDA, SOFR would need to rise to approximately 9.65% (resulting in an all-in rate of approximately 13.15%) before the Interest Coverage Ratio would reach the 3.00x covenant floor. Given that the current SOFR rate is approximately 4.60%, this represents a buffer of over 500 basis points in SOFR movement before the interest coverage covenant would become a binding constraint at this utilization level. This degree of cushion provides meaningful protection against interest rate risk.
C. Combined Stress Scenario — Higher Draw + Higher SOFR
The following table presents the Interest Coverage Ratio under a combined stress scenario, assuming full facility utilization ($450,000,000 drawn) at various SOFR rate levels, with Consolidated EBITDA held constant at $138,000,000:
Key Observation. Under a full-draw scenario ($450,000,000 outstanding), the breakeven SOFR rate for Interest Coverage Ratio compliance is approximately 6.72%, corresponding to an all-in rate of approximately 10.22%. This remains approximately 212 basis points above the current SOFR rate of 4.60%, providing meaningful cushion even under conditions of both maximum facility utilization and elevated interest rates. However, the cushion is meaningfully narrower than in the base case scenario (Section VII.B), underscoring the importance of monitoring both drawn balances and interest rate trends in tandem.
D. EBITDA Decline Sensitivity
The following table illustrates covenant compliance at various Consolidated EBITDA levels, assuming $450,000,000 of total funded debt and the base case SOFR rate of 4.60% (resulting in estimated interest expense of approximately $36,500,000 on a $450,000,000 drawn balance):
Key Observation. The Total Leverage Ratio is the binding constraint. Consolidated EBITDA could decline by approximately $18,000,000 (a decline of approximately 13.0%) to $120,000,000 before the leverage ratio reaches its 3.75x maximum at $450,000,000 of total funded debt. The Interest Coverage Ratio would not be breached until EBITDA falls to approximately $109,500,000 (a decline of approximately 20.7% from the current $138,000,000 level). This analysis confirms that the leverage covenant represents the tighter constraint and should be the primary focus of ongoing compliance monitoring.
The engagement team should be particularly attentive to any developments that could adversely affect WAL's EBITDA — including, without limitation, loss of key customer contracts (particularly in the defense and government contracting segments), supply chain disruptions affecting manufacturing operations, or increased competition in the commercial aerospace aftermarket — as even a moderate EBITDA decline could materially compress the available headroom under the leverage covenant.
VIII. Incremental Facility / Accordion Considerations
The Credit Agreement includes provisions permitting the Borrower to request incremental revolving credit commitments or incremental term loan commitments (the "Accordion") in an aggregate amount not to exceed $100,000,000. Any exercise of the Accordion is subject to the following conditions, among others:
(a) Lender Consent. Each incremental commitment must be consented to by the Administrative Agent and each lender providing such incremental commitment. No existing Lender is obligated to provide an incremental commitment; the Borrower may seek incremental commitments from existing Lenders, new lenders approved by the Administrative Agent, or any combination thereof.
(b) Pro Forma Financial Covenant Compliance. The Borrower must demonstrate pro forma compliance with all three financial maintenance covenants (Maximum Total Leverage Ratio, Minimum Interest Coverage Ratio, and Maximum Capital Expenditures) after giving effect to the incremental borrowing and any concurrent use of proceeds, calculated on a pro forma basis as of the most recently ended fiscal quarter for which financial statements are available.
Maximum Incremental Draw at Current EBITDA. At the current Consolidated EBITDA level of $138,000,000, and assuming existing total funded debt of $450,000,000 (full facility utilization), the maximum amount of additional funded debt consistent with the 3.75x Total Leverage Ratio covenant is approximately $67,500,000, calculated as follows:
Maximum Total Funded Debt: $138,000,000 × 3.75 = $517,500,000
Maximum incremental funded debt: $517,500,000 − $450,000,000 = $67,500,000
This effectively caps any pro forma compliant Accordion draw at $67,500,000 out of the $100,000,000 contractual capacity, absent growth in Consolidated EBITDA above $138,000,000. The remaining $32,500,000 of Accordion capacity would be available only if and to the extent that EBITDA increases sufficiently to maintain pro forma leverage at or below 3.75x.
Illustrative EBITDA Growth Scenario. If FY2026 Consolidated EBITDA were to grow to $150,000,000 (an increase of approximately 8.7% over FY2025), the maximum total funded debt consistent with the leverage covenant would increase to $150,000,000 × 3.75 = $562,500,000. In that scenario, the Borrower would have capacity to draw the full $100,000,000 Accordion (total funded debt of $550,000,000, leverage of 3.67x) and would have an additional $12,500,000 of funded debt capacity beyond the Accordion ($562,500,000 − $550,000,000 = $12,500,000).
The engagement team should advise the client that any contemplated Accordion exercise should be preceded by an updated financial covenant compliance analysis using the most current available financial data, and that actual compliance will depend on EBITDA at the time of the incremental draw, prevailing interest rates (which affect the interest coverage ratio), and the total funded debt level after giving effect to the incremental borrowing.
IX. Default Rate Implications
The Credit Agreement provides that upon the occurrence and during the continuance of an Event of Default, interest on all outstanding obligations shall accrue at the "Default Rate," which is defined as the otherwise applicable interest rate plus an additional 200 basis points (2.00%).
At the current SOFR rate of 4.60% and the applicable margin of 350 basis points, the default rate would be calculated as follows:
Default Rate = SOFR + Applicable Margin + Default Margin = 4.60% + 3.50% + 2.00% = 10.10%
At $450,000,000 of total funded debt, the annualized default interest expense would be:
Default Interest Expense = $450,000,000 × 10.10% = $45,450,000
The resulting Interest Coverage Ratio at the default rate would be:
Interest Coverage at Default Rate = $138,000,000 ÷ $45,450,000 = approximately 3.04x
This result remains above the 3.00x covenant floor, but with only minimal headroom of approximately 0.04x. In practical terms, any concurrent decline in EBITDA — even a modest one — in combination with the application of default interest would likely result in a breach of the Interest Coverage Ratio covenant. This analysis underscores the importance of avoiding Events of Default, as the cascading effect of default interest on covenant compliance would leave the Borrower with virtually no margin for error.
It should be noted that, in practice, the mechanics of financial covenant testing following an Event of Default are governed by additional provisions of the Credit Agreement, including potential acceleration rights, waiver and amendment procedures, and the interaction between financial covenant defaults and other Events of Default (such as payment defaults or cross-defaults to other material indebtedness). A detailed analysis of post-default remedies and enforcement mechanics is beyond the scope of this memorandum but can be prepared upon request.
X. Key Assumptions and Qualifications
The pro forma financial covenant compliance analysis set forth in this memorandum is subject to the following assumptions and qualifications:
1. Source Data. All financial data is derived from WAL's FY2025 consolidated audited financial statements (audited by Grayson Tidwell & Associates LLP, McLean, Virginia; engagement partner Catherine Llewellyn, CPA) and management representations provided by Sandra Petrova, Chief Financial Officer of WAL. This firm has not independently verified the financial data and has relied upon the accuracy and completeness of such data as provided.
2. EBITDA Definition Reconciliation. The terms "Adjusted EBITDA" (as computed by WAL management) and "Consolidated EBITDA" (as defined in the Credit Agreement) may differ based on the specific add-back and exclusion categories set forth in the Credit Agreement's definitional provisions. The $138,000,000 figure used herein represents the Adjusted EBITDA as reported by management and is subject to final reconciliation against the Credit Agreement's defined terms. Any variance could result in a modestly higher or lower Consolidated EBITDA for covenant testing purposes.
3. Pro Forma Funded Debt. The pro forma Total Funded Debt of $450,000,000 assumes that the Existing Facility (estimated payoff of $169,312,500) is fully retired contemporaneously with the initial draw under the Credit Agreement and that no other material funded debt of the Borrower or any Subsidiary Guarantor exists outside the Credit Agreement. This assumption is based on management representations and has not been independently verified.
4. Interest Expense Estimates. Interest expense estimates are approximations based on assumed average drawn balances and the prevailing SOFR rate as of the date of this analysis. Actual Consolidated Interest Expense will vary based on actual utilization patterns, borrowing dates, applicable SOFR rates on each interest determination date, actual letter of credit utilization, and other variable factors. The estimates presented herein should not be treated as projections of actual interest expense.
5. No Compliance Certificate. This analysis does not constitute a Compliance Certificate within the meaning of the Credit Agreement. The formal Compliance Certificate, which must be delivered quarterly by WAL's Chief Financial Officer pursuant to the reporting covenants of the Credit Agreement, will contain the definitive calculations of each financial covenant ratio based on actual financial results for the applicable measurement period. The first such Compliance Certificate will be due for the fiscal quarter ending March 31, 2026.
6. Capital Expenditure Classification. Capital expenditure figures are sourced from the audited financial statements and are subject to GAAP classification requirements. This analysis does not independently assess whether any particular expenditure has been correctly classified as a capital expenditure or an operating expense for purposes of the Credit Agreement's capital expenditure covenant.
7. SOFR Floor. The SOFR floor of 0.00% specified in the Credit Agreement is not material at current SOFR rate levels (approximately 4.60%) but would become relevant in a near-zero or negative rate environment, establishing a minimum effective SOFR rate of 0.00% for interest calculation purposes.
XI. Conclusions and Recommendations
Based on the analysis presented in this memorandum, WAL is in full pro forma compliance with all three financial maintenance covenants under the Credit Agreement as of December 31, 2025, with meaningful headroom on each covenant:
• Maximum Total Leverage Ratio: Pro forma ratio of approximately 3.26x versus a covenant maximum of 3.75x, providing headroom of 0.49x (equivalent to approximately $67,500,000 of additional funded debt capacity at current EBITDA).
• Minimum Interest Coverage Ratio: Pro forma ratio of approximately 4.86x versus a covenant minimum of 3.00x, providing headroom of 1.86x (EBITDA could decline by approximately 38% before the covenant would be breached at current interest expense levels).
• Maximum Capital Expenditures: FY2025 actual capital expenditures of $38,200,000 versus a $45,000,000 annual cap, with $6,800,000 of unused allowance and a carry-forward of $6,800,000 available for FY2026, resulting in an effective FY2026 CapEx limit of $51,800,000.
Recommendations. Based on the foregoing analysis, the engagement team should consider the following:
1. Leverage Ratio Monitoring. The Total Leverage Ratio is the tightest of the three financial covenants and represents the binding constraint on the Borrower's financial flexibility. The engagement team should monitor quarterly EBITDA trends and actual drawn balance levels closely to ensure continued compliance, particularly in the event of any deterioration in the Borrower's operating performance or increases in facility utilization.
2. Accordion Exercise. Any future exercise of the Accordion should be preceded by an updated compliance analysis to confirm pro forma compliance with all financial covenants. At current EBITDA levels, the maximum pro forma compliant Accordion draw is approximately $67,500,000 (out of $100,000,000 of contractual capacity). The Borrower should be advised of this limitation.
3. Solvency Certificate Consistency. The engagement team should recommend that the Solvency Certificate to be executed by Sandra Petrova, Chief Financial Officer of WAL, at the signing of the Credit Agreement on January 30, 2026, reference the pro forma financial figures presented in this memorandum for consistency and internal alignment. Specifically, the Solvency Certificate should reflect total funded debt of $450,000,000, Consolidated EBITDA of $138,000,000, and the resulting pro forma leverage and interest coverage ratios.
4. First Compliance Certificate. The first formal quarterly Compliance Certificate under the Credit Agreement will be due for the fiscal quarter ending March 31, 2026, to be delivered within 45 days following the end of such fiscal quarter (i.e., no later than May 15, 2026). The engagement team should coordinate with WAL's finance team in advance to ensure timely preparation and delivery.
5. Interest Rate Hedging. Given that the interest coverage ratio is sensitive to SOFR movements — particularly at higher utilization levels — the engagement team may wish to discuss with the Borrower whether interest rate hedging arrangements (e.g., SOFR interest rate swaps or caps) would be advisable to mitigate rate risk and protect covenant compliance over the term of the facility.
XII. Appendices
Appendix A — Syndicate Allocation Summary
The following table sets forth the commitment allocations among the Lenders under the Credit Agreement:
Prescott National Bank, N.A. holds the largest commitment at 30.0% of the facility and serves in multiple agency capacities, including as Administrative Agent, Collateral Agent, and Swingline Lender. The two Co-Syndication Agents — Harborview Trust Company and Meridian Commercial Lending Corp. — each hold 20.0% of the facility. Atlas Fidelity Bank serves as Documentation Agent with a 15.0% commitment, and Commonwealth Capital Markets, Inc. participates as a Lender with a 15.0% commitment.
Appendix B — Key Financial Data Summary
The following table summarizes the key financial data and pro forma metrics underlying this compliance analysis:
Appendix C — Key Credit Agreement Terms Referenced
The following is a summary of the key economic and structural terms of the Credit Agreement referenced in this analysis:
Appendix D — Entity Reference
Borrower:
Whitmore Aerospace LLC
• Jurisdiction: Delaware limited liability company
• EIN: 82-3194567
• Delaware Secretary of State Filing No.: 5738291
• Headquarters: 2400 Centennial Tower Drive, Suite 800, Herndon, VA 20170
Subsidiary Guarantors:
Whitmore Propulsion Systems, Inc. ("WPS")
• Jurisdiction: Delaware corporation
• EIN: 84-2057831
Whitmore Avionics Holdings LLC ("WAH")
• Jurisdiction: Delaware limited liability company
• EIN: 85-6723901
Whitmore Defense Solutions, Inc. ("WDS")
• Jurisdiction: Virginia corporation
• EIN: 54-3891204
• Virginia State Corporation Commission Entity ID: S3482917
Whitmore Precision Machining LLC ("WPM")
• Jurisdiction: Delaware limited liability company
• EIN: 86-4502178
Sponsor:
Ridgeway Capital Partners Fund IV, LP
• Ownership: 72% equity interest in WAL
• EIN: 83-1267450
• General Partner / Manager: Ridgeway Capital Partners LLC
• Managing Partner: Jonathan Kessler