A big reason why Weber is going private is they have unsustainable levels of leverage. BDT Capital pointed this out when they made their offer to Weber. Their leverage has gotten so bad that they’ve received a waiver on their debt covenants for their quarters ending December 31st, 2022 and March 31st, 2023.
Weber had a credit agreement with Bank of America with a maximum first lien leverage ratio covenant of 7:1, which was a pretty reasonable limit of a healthy company. That means that their borrowing can’t be more than seven times higher than their EBITDA for the previous four quarters. For example. if they earn $100 million for the year, then their debt can’t be higher than $700 million.
