1005-00001 · Nexford Industrial Holdings · Closing

solvency-certificate.docx DOCUMENT Finance & Banking

24 / 157 ← → ✕

SOLVENCY CERTIFICATE

Delivered pursuant to Section 4.01(a)(viii) of the Credit Agreement dated as of March 28, 2025

Credit Agreement dated as of March 28, 2025 (the "Credit Agreement"), among Nexford Industrial Holdings Inc., a Delaware corporation (the "Borrower"), the Guarantors party thereto, Crescent Harbor Bank, N.A., as Administrative Agent and Collateral Agent, Ironwood Capital Markets, LLC and Northvane Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners, and the Lenders from time to time party thereto

This Solvency Certificate (this "Certificate") is delivered pursuant to Section 4.01(a)(viii) of the Credit Agreement, which requires, as a condition precedent to the initial borrowing thereunder, the delivery by the Chief Financial Officer of the Borrower of a certificate as to the solvency of the Borrower and its Subsidiaries on a consolidated basis after giving effect to the Transactions (as defined herein) to be consummated on the date hereof.

Date: March 28, 2025

Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

Section 1. Recitals and Background

The undersigned, Michelle Kaplan, is the duly appointed and acting Chief Financial Officer of Nexford Industrial Holdings Inc., a corporation organized and existing under the laws of the State of Delaware (the "Borrower"). The undersigned delivers this Certificate in her capacity as Chief Financial Officer of the Borrower, and not in any individual or personal capacity.

The Borrower is entering into the Credit Agreement as of the date hereof, which provides for, among other things, a senior secured Term Loan B facility in an aggregate principal amount of $1,400,000,000 (the "Term Loan B"). The proceeds of the Term Loan B will be applied on the date hereof as follows:

(i) to refinance in full the existing $875,000,000 first lien term loan (together with approximately $4,375,000 in accrued and unpaid interest thereon, for a total payoff amount of approximately $879,375,000), and to terminate the existing $190,000,000 revolving credit facility (which is currently undrawn and has no outstanding borrowings), in each case outstanding under that certain Credit Agreement dated as of June 14, 2019, among the Borrower, the guarantors party thereto, and Atlas Meridian Bank, N.A., as administrative agent, as amended, restated, supplemented, or otherwise modified from time to time prior to the date hereof (the "Existing Credit Agreement");

(ii) to fund a cash dividend distribution of approximately $335,000,000 to Granite Peak NIH Holdings, LLC, the direct parent holding company of the Borrower and an affiliate of the Borrower's financial sponsor;

(iii) to pay transaction fees, costs, and expenses incurred in connection with the negotiation, execution, and delivery of the Credit Agreement and the consummation of the transactions contemplated thereby, in an aggregate amount of approximately $38,625,000; and

(iv) to provide approximately $147,000,000 in cash to the Borrower's consolidated balance sheet for general corporate purposes.

This Certificate is being delivered in connection with, and as a condition precedent to, the initial borrowing under the Credit Agreement on the date hereof. The delivery of this Certificate is required by Section 4.01(a)(viii) of the Credit Agreement, and the Administrative Agent and the Lenders are entitled to rely on the certifications contained herein in connection with the extension of credit under the Credit Agreement.

The undersigned is familiar with the financial condition of the Borrower and its Subsidiaries, both on an individual and consolidated basis, and has made such investigations, inquiries, and reviews as she has deemed appropriate and necessary in connection with the delivery of this Certificate. Without limiting the generality of the foregoing, in preparing and delivering this Certificate, the undersigned has reviewed and considered the Borrower's audited consolidated financial statements for the twelve-month period ended December 31, 2024, together with the notes thereto, and has consulted with senior members of the Borrower's finance, treasury, legal, and operations teams regarding the current and projected financial condition of the Borrower and its Subsidiaries.

Section 2. Definitions

For purposes of this Certificate, the following terms shall have the meanings set forth below:

"Fair Value" means the amount at which the assets (both tangible and intangible), in their entirety, of the Borrower and its Subsidiaries on a consolidated basis would change hands between a willing buyer and a willing seller, within a commercially reasonable period of time, each having reasonable knowledge of the relevant facts, with neither being under any compulsion to act. For the avoidance of doubt, Fair Value is determined on a going-concern basis and takes into account the value of goodwill, trade names, customer relationships, intellectual property, and other intangible assets of the Borrower and its Subsidiaries.

"Fair Saleable Value" means the amount that could be obtained if the assets (both tangible and intangible) of the Borrower and its Subsidiaries on a consolidated basis were sold as a going concern in an orderly transaction under commercially reasonable conditions, with neither buyer nor seller under compulsion to consummate such transaction, within a commercially reasonable period of time. Fair Saleable Value contemplates a sale process conducted in a manner consistent with customary market practices for businesses of a similar nature, size, and complexity as the Borrower and its Subsidiaries.

"Stated Liabilities" means the recorded liabilities (including contingent liabilities that would be recorded in accordance with GAAP) of the Borrower and its Subsidiaries on a consolidated basis, as of the date hereof, determined after giving pro forma effect to the Transactions. For purposes of this definition, Stated Liabilities includes all liabilities that would be required to be recorded or disclosed on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP, including without limitation all indebtedness, trade payables, accrued expenses, deferred revenue, pension and post-retirement benefit obligations, lease liabilities, and other recorded obligations.

"Transactions" means, collectively, the transactions contemplated by the Credit Agreement and the other Loan Documents, including without limitation: (a) the borrowing of $1,400,000,000 under the Term Loan B facility; (b) the repayment in full of the existing first lien term loan under the Existing Credit Agreement (including all accrued and unpaid interest thereon) and the termination of the existing revolving credit facility thereunder; (c) the dividend distribution of approximately $335,000,000 to Granite Peak NIH Holdings, LLC; (d) the payment of all related transaction fees, costs, and expenses in an aggregate amount of approximately $38,625,000; (e) the granting of security interests and liens contemplated by the Security Agreement and related collateral documents; and (f) all other transactions, payments, and deliveries to be made or consummated on the date hereof in connection with the foregoing.

"Identified Contingent Liabilities" means the maximum estimated amount of liabilities reasonably likely to result from pending or threatened litigation, asserted or unasserted claims, governmental investigations, environmental remediation obligations, product liability matters, warranty obligations, and other contingent liabilities of the Borrower and its Subsidiaries as of the date hereof (after giving effect to the Transactions and determined on a consolidated basis), to the extent such liabilities are not already reflected in Stated Liabilities. For purposes of this Certificate, the amount of any Identified Contingent Liability has been computed as the amount that, in light of all the facts and circumstances existing as of the date hereof, represents the amount that can reasonably be expected to become an actual or matured liability, as further described in Section 5 hereof.

Section 3. Basis for Certification

In arriving at the certifications set forth in Section 4 of this Certificate, the undersigned has reviewed and is familiar with the following information, documents, and financial data:

(a) Audited Financial Statements. The audited consolidated financial statements of the Borrower and its Subsidiaries as of and for the fiscal year ended December 31, 2024, including the consolidated balance sheet, the consolidated statement of operations, the consolidated statement of comprehensive income, the consolidated statement of changes in stockholders' equity, and the consolidated statement of cash flows, together with the notes thereto, as audited by Ashworth & Kendrick LLP (Helen Yamamoto, engagement partner), and the unqualified audit opinion delivered in connection therewith.

(b) Pro Forma Financial Information. Pro forma financial information giving effect to the Transactions, including a detailed sources and uses analysis reflecting the application of the $1,400,000,000 in Term Loan B proceeds as described in Section 1 hereof, and a pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of the date hereof.

(c) Loan Documents. The Credit Agreement, the Guarantee Agreement, the Security Agreement, the Intercreditor Agreement, the Fee Letters, and the other Loan Documents entered into in connection with the Credit Agreement.

(d) Key Financial Metrics. The following key financial metrics of the Borrower and its Subsidiaries on a consolidated basis for the twelve-month period ended December 31, 2024:

(I) Last-twelve-months ("LTM") consolidated revenue of $2,100,000,000;

(II) LTM Adjusted EBITDA of $385,000,000, consisting of $357,000,000 in reported EBITDA as calculated in accordance with the definition thereof in the Credit Agreement, plus $28,000,000 in permitted add-backs, consisting of the following:

• $12,000,000 in acquisition-related costs (including advisory, legal, and integration planning fees incurred in connection with the acquisition of Bridgewell Precision Manufacturing, Inc. completed in March 2024);

• $8,500,000 in non-recurring restructuring charges (principally related to the consolidation of two manufacturing facilities in the Engineered Systems segment);

• $4,500,000 in sponsor management fees payable to affiliates of Granite Peak Capital Partners, which will be terminated upon consummation of the Transactions; and

• $3,000,000 in integration costs associated with the Bridgewell acquisition and the implementation of a new enterprise resource planning system;

(III) LTM capital expenditures of $78,000,000 (consisting of approximately $52,000,000 in maintenance capital expenditures and approximately $26,000,000 in growth capital expenditures).

(e) Pro Forma Capital Structure. The pro forma capital structure of the Borrower and its Subsidiaries after giving effect to the Transactions, which consists of the following:

The 7.250% Senior Unsecured Notes due 2028 are not being refinanced in connection with the Transactions and will remain outstanding following the consummation thereof.

(f) Pro Forma Leverage Metrics. The following pro forma leverage metrics as of the date hereof, after giving effect to the Transactions:

• Pro forma first lien net leverage ratio: approximately 3.38x (calculated as ($1,400,000,000 – $100,000,000) ÷ $385,000,000);

• Pro forma total net leverage ratio: approximately 4.03x (calculated as ($1,400,000,000 + $250,000,000 – $100,000,000) ÷ $385,000,000);

• Pro forma first lien gross leverage ratio: approximately 3.64x (calculated as $1,400,000,000 ÷ $385,000,000);

• Pro forma total gross leverage ratio: approximately 4.29x (calculated as $1,650,000,000 ÷ $385,000,000).

(g) Collateral Valuation. An independent appraisal of the Borrower's owned real property collateral prepared by Greystone Valuation Services, Inc., which reflects an aggregate appraised fair market value of $193,000,000 across four properties, as follows:

(h) Projected Debt Service. Projected annual cash interest expense and debt amortization as follows:

• Estimated Year 1 cash interest expense on the Term Loan B of approximately $117,708,500, based on an estimated all-in interest rate of approximately 8.45% (comprised of Term SOFR at 4.35% plus a credit spread adjustment of 0.10% plus an applicable margin of 4.00%), calculated on the average outstanding principal balance during Year 1 after giving effect to scheduled amortization;

• Estimated annual cash interest expense on the 7.250% Senior Unsecured Notes of approximately $18,125,000;

• Quarterly amortization payments on the Term Loan B of $3,500,000 (representing 1.00% per annum of the original principal amount of the Term Loan B), with the balance due at maturity;

• Total estimated annual amortization of $14,000,000;

• Total estimated Year 1 debt service (interest plus amortization) of approximately $149,833,500 ($117,708,500 + $18,125,000 + $14,000,000);

(I) Projected Cash Flow. Estimated unlevered free cash flow of $307,000,000 (calculated as LTM Adjusted EBITDA of $385,000,000 less LTM capital expenditures of $78,000,000), which is approximately 2.05x estimated total annual debt service, demonstrating substantial capacity to service the Borrower's indebtedness;

(J) Management Discussions. Discussions with the Borrower's Chief Executive Officer, General Counsel, Vice President of Operations, and Treasurer regarding the current and projected financial condition and business prospects of the Borrower and its Subsidiaries, including but not limited to customer relationships, contract backlog, market conditions, competitive dynamics, regulatory environment, pending or threatened litigation, and known contingent liabilities.

The undersigned has relied upon available financial information, projections, management representations, and discussions with the Borrower's management team and advisors in preparing this Certificate, and has not relied solely on any single source of information. The undersigned believes that the information and assumptions upon which the certifications herein are based are reasonable as of the date hereof.

Section 4. Solvency Certifications

Based upon the foregoing review and analysis, and subject to the assumptions and qualifications set forth in Section 5 of this Certificate, the undersigned hereby certifies as follows:

(a) Fair Value Exceeds Stated Liabilities

After giving pro forma effect to the Transactions (including, without limitation, the incurrence of $1,400,000,000 of Indebtedness under the Term Loan B facility, the repayment in full of approximately $879,375,000 under the Existing Credit Agreement (representing the $875,000,000 outstanding principal amount of the existing first lien term loan plus approximately $4,375,000 in accrued and unpaid interest thereon) and the termination of the $190,000,000 revolving credit facility thereunder, the dividend distribution of approximately $335,000,000 to Granite Peak NIH Holdings, LLC, and the payment of approximately $38,625,000 in transaction fees, costs, and expenses), the Fair Value of the assets of the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, exceeds the sum of their Stated Liabilities (including all subordinated, unsubordinated, secured, unsecured, fixed, contingent, matured, and unmatured liabilities) and Identified Contingent Liabilities as of the date hereof.

(b) Fair Saleable Value Exceeds Stated Liabilities

After giving pro forma effect to the Transactions, the Fair Saleable Value of the assets of the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, is greater than the total amount of their Stated Liabilities (including all subordinated, unsubordinated, secured, unsecured, fixed, contingent, matured, and unmatured liabilities) and Identified Contingent Liabilities as of the date hereof. The undersigned believes that the Borrower and its Subsidiaries, operating as a going concern, possess assets that, if sold in a commercially reasonable manner and within a commercially reasonable period of time, would yield proceeds sufficient to satisfy all of their respective Stated Liabilities and Identified Contingent Liabilities.

After giving pro forma effect to the Transactions, the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, are able to pay their respective debts and other liabilities (including all subordinated, unsubordinated, secured, unsecured, fixed, contingent, matured, and unmatured liabilities) as such debts and liabilities become absolute and matured in the normal course of business. In reaching this conclusion, the undersigned has considered, among other things, the following:

(i) The Borrower and its Subsidiaries are projected to generate LTM Adjusted EBITDA of $385,000,000 and estimated unlevered free cash flow of $307,000,000 (Adjusted EBITDA of $385,000,000 less capital expenditures of $78,000,000);

(ii) Estimated total annual debt service (including interest on the Term Loan B, interest on the Senior Unsecured Notes, and scheduled amortization on the Term Loan B) is approximately $149,833,500, resulting in projected levered free cash flow (before mandatory prepayments) in excess of $157,000,000;

(iii) The Borrower's projected cash generation capacity is well in excess of its mandatory prepayment obligations under the Credit Agreement's excess cash flow sweep provisions, which require the following prepayments:

• 50% of Excess Cash Flow (as defined in the Credit Agreement) in any fiscal year in which the first lien net leverage ratio as of the last day of such fiscal year exceeds 4.25x;

• 25% of Excess Cash Flow in any fiscal year in which the first lien net leverage ratio as of the last day of such fiscal year is less than or equal to 4.25x but greater than 3.50x; and

• 0% of Excess Cash Flow in any fiscal year in which the first lien net leverage ratio as of the last day of such fiscal year is less than or equal to 3.50x;

(iv) The Borrower will have pro forma cash and cash equivalents of approximately $100,000,000 on its consolidated balance sheet as of the date hereof after giving effect to the Transactions, providing immediate liquidity to meet near-term obligations; and

(v) The Borrower is expected to have access to additional liquidity through the revolving credit facility or other working capital arrangements as may be available from time to time.

(d) Adequate Capital; Not Unreasonably Small Capital

After giving pro forma effect to the Transactions, the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, do not have unreasonably small capital for the conduct of their respective businesses as currently conducted and as proposed to be conducted following the consummation of the Transactions. In reaching this conclusion, the undersigned has considered, among other things, the following:

(i) Business Profile and Scale. Nexford Industrial Holdings Inc. operates a diversified industrials and specialty manufacturing platform with consolidated annual revenue of approximately $2,100,000,000, approximately 8,400 full-time employees, and 14 manufacturing facilities located across North America. The Borrower's operations are organized into three reportable operating segments:

• Precision Components (approximately 52% of consolidated revenue, or approximately $1,092,000,000), which manufactures precision-engineered metal and polymer components for aerospace, defense, and industrial end markets;

• Engineered Systems (approximately 31% of consolidated revenue, or approximately $651,000,000), which designs and manufactures custom-engineered fluid handling, thermal management, and automation systems; and

• Industrial Coatings & Surface Technologies (approximately 17% of consolidated revenue, or approximately $357,000,000), which provides specialty coatings, surface treatments, and finishing services for the automotive, energy, and general industrial sectors.

(ii) Liquidity. Pro forma cash and cash equivalents on the Borrower's consolidated balance sheet of approximately $100,000,000 provides an adequate liquidity cushion to meet working capital needs, capital expenditure requirements, and other foreseeable cash requirements of the Borrower and its Subsidiaries in the ordinary course of business.

(iii) Financial Covenant Headroom. The Credit Agreement contains a springing financial covenant, requiring a maximum first lien net leverage ratio of 5.00x, which is tested only when revolving borrowings (net of up to $15,000,000 in cash-collateralized letters of credit) exceed 40% of total revolving commitments as of the last day of any fiscal quarter. The pro forma closing first lien net leverage ratio of approximately 3.38x provides approximately 1.62 turns of headroom to the financial covenant trigger level of 5.00x, representing substantial cushion against adverse business developments.

(iv) Diversification and Stability. The Borrower benefits from a diversified end-market exposure (aerospace & defense, automotive, energy, general industrial), a broad customer base (no single customer representing more than 7% of consolidated revenue), long-standing customer relationships, and meaningful barriers to entry in its core product categories, all of which contribute to the stability and predictability of the Borrower's cash flows and, accordingly, the adequacy of its capital base.

(e) No Intent to Hinder, Delay, or Defraud

The Borrower and its Subsidiaries do not intend to, and the undersigned does not believe that they will, incur debts beyond their ability to pay as such debts mature, taking into account the timing and amounts of cash to be received by the Borrower and its Subsidiaries (from operations, asset sales, refinancing transactions, and all other sources reasonably anticipated) and the timing and amounts of cash to be payable on or in respect of the Indebtedness and other liabilities of the Borrower and its Subsidiaries.

The Transactions are not being consummated with the intent to hinder, delay, or defraud any present or future creditor of the Borrower or any of its Subsidiaries. The Transactions have been undertaken for legitimate business purposes, including refinancing the Borrower's existing indebtedness on improved terms, optimizing the Borrower's capital structure, and returning capital to the Borrower's equity holders, and the undersigned believes that the Borrower and its Subsidiaries will be able to satisfy their obligations to creditors following the consummation of the Transactions.

Section 5. Assumptions and Qualifications

The certifications set forth in Section 4 of this Certificate are subject to the following assumptions and qualifications:

(a) Capacity. The certifications set forth herein are being made solely in the capacity of the undersigned as Chief Financial Officer of the Borrower and not in any personal or individual capacity. The undersigned shall have no personal liability with respect to the certifications contained herein, except to the extent of any fraud, willful misconduct, or bad faith on the part of the undersigned.

(b) Reasonableness of Assumptions. The certifications set forth herein are based upon financial data, assumptions, projections, and other information that the undersigned believes to be reasonable as of the date hereof. Projections and forward-looking statements contained or referenced herein are inherently uncertain and are based on assumptions that may not be realized. Actual results may differ materially from projected results due to factors beyond the control of the Borrower and its Subsidiaries, including changes in general economic conditions, industry trends, interest rates, raw material costs, labor markets, customer demand, competitive dynamics, regulatory requirements, and other factors.

(c) Reliance Limitation. This Certificate is being delivered to Crescent Harbor Bank, N.A., in its capacity as Administrative Agent under the Credit Agreement, for the benefit of the Administrative Agent, the Collateral Agent, and the Lenders under the Credit Agreement, and solely in connection with the satisfaction of the conditions precedent to the initial borrowing under Section 4.01 of the Credit Agreement. This Certificate may not be relied upon by any other Person or for any other purpose without the express prior written consent of the Borrower. Without limiting the foregoing, this Certificate is not being delivered for the benefit of, and may not be relied upon by, any holder of the Borrower's 7.250% Senior Unsecured Notes due 2028, the trustee thereunder, any equity holder of the Borrower, or any other Person not a party to or beneficiary of the Credit Agreement.

(d) No Legal, Accounting, or Tax Opinion. The undersigned is not expressing any opinion or view as to any legal, accounting, or tax matter in connection with this Certificate. The determination of solvency set forth herein is not a legal opinion and is not rendered in accordance with, and should not be construed as an opinion under, the Uniform Fraudulent Transfer Act, the Uniform Voidable Transactions Act, the Uniform Fraudulent Conveyance Act, Section 548 of Title 11 of the United States Code (the "Bankruptcy Code"), or any similar state or federal law relating to fraudulent transfer, fraudulent conveyance, or voidable transactions. This Certificate is provided solely to satisfy the conditions precedent to the initial borrowing under Section 4.01(a)(viii) of the Credit Agreement and for no other purpose.

(e) Contingent Liability Computation. For purposes of this Certificate, the amount of any contingent liability at any date has been computed as the amount that, in light of all the facts and circumstances existing as of such date, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such amount is combated or contested by the Borrower or any of its Subsidiaries). The undersigned has, in consultation with the Borrower's General Counsel and outside litigation counsel, reviewed the pending and threatened litigation, asserted and unasserted claims, and other contingent liabilities of the Borrower and its Subsidiaries and has determined the estimated amounts thereof for purposes of the certifications set forth herein.

(f) Date Certain. The certifications contained herein are made as of the date hereof and speak only as of the date hereof. The undersigned undertakes no obligation to update, revise, or supplement this Certificate at any time following the date hereof.

Section 6. Governing Law

This Certificate shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to conflict of laws principles that would result in the application of the laws of any other jurisdiction (other than Section 5-1401 and Section 5-1402 of the New York General Obligations Law).

[Signature Page Follows]

[Signature Page to Solvency Certificate]

IN WITNESS WHEREOF, the undersigned has executed and delivered this Solvency Certificate as of the date first written above.

NEXFORD INDUSTRIAL HOLDINGS INC.

By: ________

Name: Michelle Kaplan

Title: Chief Financial Officer

Date: March 28, 2025

Delivery Notation

Delivered to:

Crescent Harbor Bank, N.A. as Administrative Agent under the Credit Agreement 320 Federal Street Boston, Massachusetts 02110

Attention: Elaine Prescott, Managing Director, Leveraged Finance Origination

Email: elaine.prescott@crescentharbor.com

Copy to:

Whitfield & Gage LLP Counsel to the Administrative Agent 51 West 52nd Street New York, New York 10019

Attention: Margaret Ashby, Partner

Email: mashby@whitfieldgage.com

Instrument	Principal Amount	Maturity	Rate / Terms
Term Loan B (Crescent Harbor Bank, N.A., as Administrative Agent)	$1,400,000,000	March 2032	SOFR + 4.00% (0.10% CSA)
7.250% Senior Unsecured Notes (Pinnacle Trust Company, as Trustee)	$250,000,000	November 2028	7.250% Fixed
Total Funded Debt	$1,650,000,000
Less: Pro Forma Cash and Cash Equivalents	($100,000,000)
Pro Forma Net Debt	$1,550,000,000
Property	Location	Appraised Value
Nexford Manufacturing Campus	Greenville, South Carolina	$72,000,000
Precision Components Facility	Elyria, Ohio	$48,500,000
Engineered Systems Plant	Houston, Texas	$44,000,000
Coatings & Surface Technologies Center	Charlotte, North Carolina	$28,500,000
Total Appraised Value	$193,000,000

SOLVENCY CERTIFICATE
Delivered pursuant to Section 4.01(a)(viii) of the Credit Agreement dated as of March 28, 2025
Credit Agreement dated as of March 28, 2025 (the "Credit Agreement"), among Nexford Industrial Holdings Inc., a Delaware corporation (the "Borrower"), the Guarantors party thereto, Crescent Harbor Bank, N.A., as Administrative Agent and Collateral Agent, Ironwood Capital Markets, LLC and Northvane Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners, and the Lenders from time to time party thereto
This Solvency Certificate (this "Certificate") is delivered pursuant to Section 4.01(a)(viii) of the Credit Agreement, which requires, as a condition precedent to the initial borrowing thereunder, the delivery by the Chief Financial Officer of the Borrower of a certificate as to the solvency of the Borrower and its Subsidiaries on a consolidated basis after giving effect to the Transactions (as defined herein) to be consummated on the date hereof.
Date: March 28, 2025
Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
Section 1. Recitals and Background
The undersigned, Michelle Kaplan, is the duly appointed and acting Chief Financial Officer of Nexford Industrial Holdings Inc., a corporation organized and existing under the laws of the State of Delaware (the "Borrower"). The undersigned delivers this Certificate in her capacity as Chief Financial Officer of the Borrower, and not in any individual or personal capacity.
The Borrower is entering into the Credit Agreement as of the date hereof, which provides for, among other things, a senior secured Term Loan B facility in an aggregate principal amount of $1,400,000,000 (the "Term Loan B"). The proceeds of the Term Loan B will be applied on the date hereof as follows:
(i) to refinance in full the existing $875,000,000 first lien term loan (together with approximately $4,375,000 in accrued and unpaid interest thereon, for a total payoff amount of approximately $879,375,000), and to terminate the existing $190,000,000 revolving credit facility (which is currently undrawn and has no outstanding borrowings), in each case outstanding under that certain Credit Agreement dated as of June 14, 2019, among the Borrower, the guarantors party thereto, and Atlas Meridian Bank, N.A., as administrative agent, as amended, restated, supplemented, or otherwise modified from time to time prior to the date hereof (the "Existing Credit Agreement");
(ii) to fund a cash dividend distribution of approximately $335,000,000 to Granite Peak NIH Holdings, LLC, the direct parent holding company of the Borrower and an affiliate of the Borrower's financial sponsor;
(iii) to pay transaction fees, costs, and expenses incurred in connection with the negotiation, execution, and delivery of the Credit Agreement and the consummation of the transactions contemplated thereby, in an aggregate amount of approximately $38,625,000; and
(iv) to provide approximately $147,000,000 in cash to the Borrower's consolidated balance sheet for general corporate purposes.
This Certificate is being delivered in connection with, and as a condition precedent to, the initial borrowing under the Credit Agreement on the date hereof. The delivery of this Certificate is required by Section 4.01(a)(viii) of the Credit Agreement, and the Administrative Agent and the Lenders are entitled to rely on the certifications contained herein in connection with the extension of credit under the Credit Agreement.
The undersigned is familiar with the financial condition of the Borrower and its Subsidiaries, both on an individual and consolidated basis, and has made such investigations, inquiries, and reviews as she has deemed appropriate and necessary in connection with the delivery of this Certificate. Without limiting the generality of the foregoing, in preparing and delivering this Certificate, the undersigned has reviewed and considered the Borrower's audited consolidated financial statements for the twelve-month period ended December 31, 2024, together with the notes thereto, and has consulted with senior members of the Borrower's finance, treasury, legal, and operations teams regarding the current and projected financial condition of the Borrower and its Subsidiaries.
Section 2. Definitions
For purposes of this Certificate, the following terms shall have the meanings set forth below:
"Fair Value" means the amount at which the assets (both tangible and intangible), in their entirety, of the Borrower and its Subsidiaries on a consolidated basis would change hands between a willing buyer and a willing seller, within a commercially reasonable period of time, each having reasonable knowledge of the relevant facts, with neither being under any compulsion to act. For the avoidance of doubt, Fair Value is determined on a going-concern basis and takes into account the value of goodwill, trade names, customer relationships, intellectual property, and other intangible assets of the Borrower and its Subsidiaries.
"Fair Saleable Value" means the amount that could be obtained if the assets (both tangible and intangible) of the Borrower and its Subsidiaries on a consolidated basis were sold as a going concern in an orderly transaction under commercially reasonable conditions, with neither buyer nor seller under compulsion to consummate such transaction, within a commercially reasonable period of time. Fair Saleable Value contemplates a sale process conducted in a manner consistent with customary market practices for businesses of a similar nature, size, and complexity as the Borrower and its Subsidiaries.
"Stated Liabilities" means the recorded liabilities (including contingent liabilities that would be recorded in accordance with GAAP) of the Borrower and its Subsidiaries on a consolidated basis, as of the date hereof, determined after giving pro forma effect to the Transactions. For purposes of this definition, Stated Liabilities includes all liabilities that would be required to be recorded or disclosed on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP, including without limitation all indebtedness, trade payables, accrued expenses, deferred revenue, pension and post-retirement benefit obligations, lease liabilities, and other recorded obligations.
"Transactions" means, collectively, the transactions contemplated by the Credit Agreement and the other Loan Documents, including without limitation: (a) the borrowing of $1,400,000,000 under the Term Loan B facility; (b) the repayment in full of the existing first lien term loan under the Existing Credit Agreement (including all accrued and unpaid interest thereon) and the termination of the existing revolving credit facility thereunder; (c) the dividend distribution of approximately $335,000,000 to Granite Peak NIH Holdings, LLC; (d) the payment of all related transaction fees, costs, and expenses in an aggregate amount of approximately $38,625,000; (e) the granting of security interests and liens contemplated by the Security Agreement and related collateral documents; and (f) all other transactions, payments, and deliveries to be made or consummated on the date hereof in connection with the foregoing.
"Identified Contingent Liabilities" means the maximum estimated amount of liabilities reasonably likely to result from pending or threatened litigation, asserted or unasserted claims, governmental investigations, environmental remediation obligations, product liability matters, warranty obligations, and other contingent liabilities of the Borrower and its Subsidiaries as of the date hereof (after giving effect to the Transactions and determined on a consolidated basis), to the extent such liabilities are not already reflected in Stated Liabilities. For purposes of this Certificate, the amount of any Identified Contingent Liability has been computed as the amount that, in light of all the facts and circumstances existing as of the date hereof, represents the amount that can reasonably be expected to become an actual or matured liability, as further described in Section 5 hereof.
Section 3. Basis for Certification
In arriving at the certifications set forth in Section 4 of this Certificate, the undersigned has reviewed and is familiar with the following information, documents, and financial data:
(a) Audited Financial Statements. The audited consolidated financial statements of the Borrower and its Subsidiaries as of and for the fiscal year ended December 31, 2024, including the consolidated balance sheet, the consolidated statement of operations, the consolidated statement of comprehensive income, the consolidated statement of changes in stockholders' equity, and the consolidated statement of cash flows, together with the notes thereto, as audited by Ashworth & Kendrick LLP (Helen Yamamoto, engagement partner), and the unqualified audit opinion delivered in connection therewith.
(b) Pro Forma Financial Information. Pro forma financial information giving effect to the Transactions, including a detailed sources and uses analysis reflecting the application of the $1,400,000,000 in Term Loan B proceeds as described in Section 1 hereof, and a pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of the date hereof.
(c) Loan Documents. The Credit Agreement, the Guarantee Agreement, the Security Agreement, the Intercreditor Agreement, the Fee Letters, and the other Loan Documents entered into in connection with the Credit Agreement.
(d) Key Financial Metrics. The following key financial metrics of the Borrower and its Subsidiaries on a consolidated basis for the twelve-month period ended December 31, 2024:
(I) Last-twelve-months ("LTM") consolidated revenue of $2,100,000,000;
(II) LTM Adjusted EBITDA of $385,000,000, consisting of $357,000,000 in reported EBITDA as calculated in accordance with the definition thereof in the Credit Agreement, plus $28,000,000 in permitted add-backs, consisting of the following:
•  $12,000,000 in acquisition-related costs (including advisory, legal, and integration planning fees incurred in connection with the acquisition of Bridgewell Precision Manufacturing, Inc. completed in March 2024);
•  $8,500,000 in non-recurring restructuring charges (principally related to the consolidation of two manufacturing facilities in the Engineered Systems segment);
•  $4,500,000 in sponsor management fees payable to affiliates of Granite Peak Capital Partners, which will be terminated upon consummation of the Transactions; and
•  $3,000,000 in integration costs associated with the Bridgewell acquisition and the implementation of a new enterprise resource planning system;
(III) LTM capital expenditures of $78,000,000 (consisting of approximately $52,000,000 in maintenance capital expenditures and approximately $26,000,000 in growth capital expenditures).
(e) Pro Forma Capital Structure. The pro forma capital structure of the Borrower and its Subsidiaries after giving effect to the Transactions, which consists of the following:
The 7.250% Senior Unsecured Notes due 2028 are not being refinanced in connection with the Transactions and will remain outstanding following the consummation thereof.
(f) Pro Forma Leverage Metrics. The following pro forma leverage metrics as of the date hereof, after giving effect to the Transactions:
•  Pro forma first lien net leverage ratio: approximately 3.38x (calculated as ($1,400,000,000 – $100,000,000) ÷ $385,000,000);
•  Pro forma total net leverage ratio: approximately 4.03x (calculated as ($1,400,000,000 + $250,000,000 – $100,000,000) ÷ $385,000,000);
•  Pro forma first lien gross leverage ratio: approximately 3.64x (calculated as $1,400,000,000 ÷ $385,000,000);
•  Pro forma total gross leverage ratio: approximately 4.29x (calculated as $1,650,000,000 ÷ $385,000,000).
(g) Collateral Valuation. An independent appraisal of the Borrower's owned real property collateral prepared by Greystone Valuation Services, Inc., which reflects an aggregate appraised fair market value of $193,000,000 across four properties, as follows:
(h) Projected Debt Service. Projected annual cash interest expense and debt amortization as follows:
•  Estimated Year 1 cash interest expense on the Term Loan B of approximately $117,708,500, based on an estimated all-in interest rate of approximately 8.45% (comprised of Term SOFR at 4.35% plus a credit spread adjustment of 0.10% plus an applicable margin of 4.00%), calculated on the average outstanding principal balance during Year 1 after giving effect to scheduled amortization;
•  Estimated annual cash interest expense on the 7.250% Senior Unsecured Notes of approximately $18,125,000;
•  Quarterly amortization payments on the Term Loan B of $3,500,000 (representing 1.00% per annum of the original principal amount of the Term Loan B), with the balance due at maturity;
•  Total estimated annual amortization of $14,000,000;
•  Total estimated Year 1 debt service (interest plus amortization) of approximately $149,833,500 ($117,708,500 + $18,125,000 + $14,000,000);
(I) Projected Cash Flow. Estimated unlevered free cash flow of $307,000,000 (calculated as LTM Adjusted EBITDA of $385,000,000 less LTM capital expenditures of $78,000,000), which is approximately 2.05x estimated total annual debt service, demonstrating substantial capacity to service the Borrower's indebtedness;
(J) Management Discussions. Discussions with the Borrower's Chief Executive Officer, General Counsel, Vice President of Operations, and Treasurer regarding the current and projected financial condition and business prospects of the Borrower and its Subsidiaries, including but not limited to customer relationships, contract backlog, market conditions, competitive dynamics, regulatory environment, pending or threatened litigation, and known contingent liabilities.
The undersigned has relied upon available financial information, projections, management representations, and discussions with the Borrower's management team and advisors in preparing this Certificate, and has not relied solely on any single source of information. The undersigned believes that the information and assumptions upon which the certifications herein are based are reasonable as of the date hereof.
Section 4. Solvency Certifications
Based upon the foregoing review and analysis, and subject to the assumptions and qualifications set forth in Section 5 of this Certificate, the undersigned hereby certifies as follows:
(a) Fair Value Exceeds Stated Liabilities
After giving pro forma effect to the Transactions (including, without limitation, the incurrence of $1,400,000,000 of Indebtedness under the Term Loan B facility, the repayment in full of approximately $879,375,000 under the Existing Credit Agreement (representing the $875,000,000 outstanding principal amount of the existing first lien term loan plus approximately $4,375,000 in accrued and unpaid interest thereon) and the termination of the $190,000,000 revolving credit facility thereunder, the dividend distribution of approximately $335,000,000 to Granite Peak NIH Holdings, LLC, and the payment of approximately $38,625,000 in transaction fees, costs, and expenses), the Fair Value of the assets of the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, exceeds the sum of their Stated Liabilities (including all subordinated, unsubordinated, secured, unsecured, fixed, contingent, matured, and unmatured liabilities) and Identified Contingent Liabilities as of the date hereof.
(b) Fair Saleable Value Exceeds Stated Liabilities
After giving pro forma effect to the Transactions, the Fair Saleable Value of the assets of the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, is greater than the total amount of their Stated Liabilities (including all subordinated, unsubordinated, secured, unsecured, fixed, contingent, matured, and unmatured liabilities) and Identified Contingent Liabilities as of the date hereof. The undersigned believes that the Borrower and its Subsidiaries, operating as a going concern, possess assets that, if sold in a commercially reasonable manner and within a commercially reasonable period of time, would yield proceeds sufficient to satisfy all of their respective Stated Liabilities and Identified Contingent Liabilities.
(c) Ability to Pay Debts as They Become Due
After giving pro forma effect to the Transactions, the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, are able to pay their respective debts and other liabilities (including all subordinated, unsubordinated, secured, unsecured, fixed, contingent, matured, and unmatured liabilities) as such debts and liabilities become absolute and matured in the normal course of business. In reaching this conclusion, the undersigned has considered, among other things, the following:
(i) The Borrower and its Subsidiaries are projected to generate LTM Adjusted EBITDA of $385,000,000 and estimated unlevered free cash flow of $307,000,000 (Adjusted EBITDA of $385,000,000 less capital expenditures of $78,000,000);
(ii) Estimated total annual debt service (including interest on the Term Loan B, interest on the Senior Unsecured Notes, and scheduled amortization on the Term Loan B) is approximately $149,833,500, resulting in projected levered free cash flow (before mandatory prepayments) in excess of $157,000,000;
(iii) The Borrower's projected cash generation capacity is well in excess of its mandatory prepayment obligations under the Credit Agreement's excess cash flow sweep provisions, which require the following prepayments:
•  50% of Excess Cash Flow (as defined in the Credit Agreement) in any fiscal year in which the first lien net leverage ratio as of the last day of such fiscal year exceeds 4.25x;
•  25% of Excess Cash Flow in any fiscal year in which the first lien net leverage ratio as of the last day of such fiscal year is less than or equal to 4.25x but greater than 3.50x; and
•  0% of Excess Cash Flow in any fiscal year in which the first lien net leverage ratio as of the last day of such fiscal year is less than or equal to 3.50x;
(iv) The Borrower will have pro forma cash and cash equivalents of approximately $100,000,000 on its consolidated balance sheet as of the date hereof after giving effect to the Transactions, providing immediate liquidity to meet near-term obligations; and
(v) The Borrower is expected to have access to additional liquidity through the revolving credit facility or other working capital arrangements as may be available from time to time.
(d) Adequate Capital; Not Unreasonably Small Capital
After giving pro forma effect to the Transactions, the Borrower and its Subsidiaries, taken as a whole on a consolidated basis, do not have unreasonably small capital for the conduct of their respective businesses as currently conducted and as proposed to be conducted following the consummation of the Transactions. In reaching this conclusion, the undersigned has considered, among other things, the following:
(i) Business Profile and Scale. Nexford Industrial Holdings Inc. operates a diversified industrials and specialty manufacturing platform with consolidated annual revenue of approximately $2,100,000,000, approximately 8,400 full-time employees, and 14 manufacturing facilities located across North America. The Borrower's operations are organized into three reportable operating segments:
•  Precision Components (approximately 52% of consolidated revenue, or approximately $1,092,000,000), which manufactures precision-engineered metal and polymer components for aerospace, defense, and industrial end markets;
•  Engineered Systems (approximately 31% of consolidated revenue, or approximately $651,000,000), which designs and manufactures custom-engineered fluid handling, thermal management, and automation systems; and
•  Industrial Coatings & Surface Technologies (approximately 17% of consolidated revenue, or approximately $357,000,000), which provides specialty coatings, surface treatments, and finishing services for the automotive, energy, and general industrial sectors.
(ii) Liquidity. Pro forma cash and cash equivalents on the Borrower's consolidated balance sheet of approximately $100,000,000 provides an adequate liquidity cushion to meet working capital needs, capital expenditure requirements, and other foreseeable cash requirements of the Borrower and its Subsidiaries in the ordinary course of business.
(iii) Financial Covenant Headroom. The Credit Agreement contains a springing financial covenant, requiring a maximum first lien net leverage ratio of 5.00x, which is tested only when revolving borrowings (net of up to $15,000,000 in cash-collateralized letters of credit) exceed 40% of total revolving commitments as of the last day of any fiscal quarter. The pro forma closing first lien net leverage ratio of approximately 3.38x provides approximately 1.62 turns of headroom to the financial covenant trigger level of 5.00x, representing substantial cushion against adverse business developments.
(iv) Diversification and Stability. The Borrower benefits from a diversified end-market exposure (aerospace & defense, automotive, energy, general industrial), a broad customer base (no single customer representing more than 7% of consolidated revenue), long-standing customer relationships, and meaningful barriers to entry in its core product categories, all of which contribute to the stability and predictability of the Borrower's cash flows and, accordingly, the adequacy of its capital base.
(e) No Intent to Hinder, Delay, or Defraud
The Borrower and its Subsidiaries do not intend to, and the undersigned does not believe that they will, incur debts beyond their ability to pay as such debts mature, taking into account the timing and amounts of cash to be received by the Borrower and its Subsidiaries (from operations, asset sales, refinancing transactions, and all other sources reasonably anticipated) and the timing and amounts of cash to be payable on or in respect of the Indebtedness and other liabilities of the Borrower and its Subsidiaries.
The Transactions are not being consummated with the intent to hinder, delay, or defraud any present or future creditor of the Borrower or any of its Subsidiaries. The Transactions have been undertaken for legitimate business purposes, including refinancing the Borrower's existing indebtedness on improved terms, optimizing the Borrower's capital structure, and returning capital to the Borrower's equity holders, and the undersigned believes that the Borrower and its Subsidiaries will be able to satisfy their obligations to creditors following the consummation of the Transactions.
Section 5. Assumptions and Qualifications
The certifications set forth in Section 4 of this Certificate are subject to the following assumptions and qualifications:
(a) Capacity. The certifications set forth herein are being made solely in the capacity of the undersigned as Chief Financial Officer of the Borrower and not in any personal or individual capacity. The undersigned shall have no personal liability with respect to the certifications contained herein, except to the extent of any fraud, willful misconduct, or bad faith on the part of the undersigned.
(b) Reasonableness of Assumptions. The certifications set forth herein are based upon financial data, assumptions, projections, and other information that the undersigned believes to be reasonable as of the date hereof. Projections and forward-looking statements contained or referenced herein are inherently uncertain and are based on assumptions that may not be realized. Actual results may differ materially from projected results due to factors beyond the control of the Borrower and its Subsidiaries, including changes in general economic conditions, industry trends, interest rates, raw material costs, labor markets, customer demand, competitive dynamics, regulatory requirements, and other factors.
(c) Reliance Limitation. This Certificate is being delivered to Crescent Harbor Bank, N.A., in its capacity as Administrative Agent under the Credit Agreement, for the benefit of the Administrative Agent, the Collateral Agent, and the Lenders under the Credit Agreement, and solely in connection with the satisfaction of the conditions precedent to the initial borrowing under Section 4.01 of the Credit Agreement. This Certificate may not be relied upon by any other Person or for any other purpose without the express prior written consent of the Borrower. Without limiting the foregoing, this Certificate is not being delivered for the benefit of, and may not be relied upon by, any holder of the Borrower's 7.250% Senior Unsecured Notes due 2028, the trustee thereunder, any equity holder of the Borrower, or any other Person not a party to or beneficiary of the Credit Agreement.
(d) No Legal, Accounting, or Tax Opinion. The undersigned is not expressing any opinion or view as to any legal, accounting, or tax matter in connection with this Certificate. The determination of solvency set forth herein is not a legal opinion and is not rendered in accordance with, and should not be construed as an opinion under, the Uniform Fraudulent Transfer Act, the Uniform Voidable Transactions Act, the Uniform Fraudulent Conveyance Act, Section 548 of Title 11 of the United States Code (the "Bankruptcy Code"), or any similar state or federal law relating to fraudulent transfer, fraudulent conveyance, or voidable transactions. This Certificate is provided solely to satisfy the conditions precedent to the initial borrowing under Section 4.01(a)(viii) of the Credit Agreement and for no other purpose.
(e) Contingent Liability Computation. For purposes of this Certificate, the amount of any contingent liability at any date has been computed as the amount that, in light of all the facts and circumstances existing as of such date, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such amount is combated or contested by the Borrower or any of its Subsidiaries). The undersigned has, in consultation with the Borrower's General Counsel and outside litigation counsel, reviewed the pending and threatened litigation, asserted and unasserted claims, and other contingent liabilities of the Borrower and its Subsidiaries and has determined the estimated amounts thereof for purposes of the certifications set forth herein.
(f) Date Certain. The certifications contained herein are made as of the date hereof and speak only as of the date hereof. The undersigned undertakes no obligation to update, revise, or supplement this Certificate at any time following the date hereof.
Section 6. Governing Law
This Certificate shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to conflict of laws principles that would result in the application of the laws of any other jurisdiction (other than Section 5-1401 and Section 5-1402 of the New York General Obligations Law).
[Signature Page Follows]
[Signature Page to Solvency Certificate]
IN WITNESS WHEREOF, the undersigned has executed and delivered this Solvency Certificate as of the date first written above.
NEXFORD INDUSTRIAL HOLDINGS INC.
By: ________
Name: Michelle Kaplan
Title: Chief Financial Officer
Date: March 28, 2025
Delivery Notation
Delivered to:
Crescent Harbor Bank, N.A. as Administrative Agent under the Credit Agreement 320 Federal Street Boston, Massachusetts 02110
Attention: Elaine Prescott, Managing Director, Leveraged Finance Origination
Email: elaine.prescott@crescentharbor.com
Copy to:
Whitfield & Gage LLP Counsel to the Administrative Agent 51 West 52nd Street New York, New York 10019
Attention: Margaret Ashby, Partner
Email: mashby@whitfieldgage.com
Instrument | Principal Amount | Maturity | Rate / Terms
Term Loan B (Crescent Harbor Bank, N.A., as Administrative Agent) | $1,400,000,000 | March 2032 | SOFR + 4.00% (0.10% CSA)
7.250% Senior Unsecured Notes (Pinnacle Trust Company, as Trustee) | $250,000,000 | November 2028 | 7.250% Fixed
Total Funded Debt | $1,650,000,000
Less: Pro Forma Cash and Cash Equivalents | ($100,000,000)
Pro Forma Net Debt | $1,550,000,000
Property | Location | Appraised Value
Nexford Manufacturing Campus | Greenville, South Carolina | $72,000,000
Precision Components Facility | Elyria, Ohio | $48,500,000
Engineered Systems Plant | Houston, Texas | $44,000,000
Coatings & Surface Technologies Center | Charlotte, North Carolina | $28,500,000
Total Appraised Value | $193,000,000

SOLVENCY CERTIFICATE

NEXFORD INDUSTRIAL HOLDINGS INC.

Record

Parties

Dates

Amounts