Ducommun Reloads: How a $650M Credit Facility Fuels its M&A War Chest

COSTA MESA, CA – December 01, 2025 – On the surface, Ducommun Incorporated’s announcement of an amended credit facility looks like standard corporate finance housekeeping. The aerospace and defense supplier (NYSE: DCO) secured a new package featuring a $450 million revolving line of credit and a $200 million term loan. But to dismiss this as a simple refinancing is to miss the story behind the transaction. This is not just a defensive move to manage debt; it is a calculated and aggressive maneuver to load a war chest, sharpen competitive positioning, and accelerate the company’s ambitious “VISION 2027” growth strategy.

By replacing its previous facility, Ducommun has done more than just extend its debt maturity by over three years to 2030. It has fundamentally altered its capacity for strategic action. The most telling detail is the dramatic upsizing of its revolving credit line from $200 million to $450 million, providing what the company reports is over $300 million in immediate availability. This isn't just extra liquidity for a rainy day; it's dry powder explicitly earmarked for growth.

As chairman, president and CEO Stephen G. Oswald stated, “The new credit facility provides us with significant additional firepower to execute on acquisition opportunities and grow the business.” This single statement reframes the entire event, shifting it from a balance sheet footnote to a declaration of intent. For a company with a market cap hovering around $1 billion, access to this level of capital represents a transformative capability to pursue strategic M&A.

Fueling the VISION 2027 Engine

Ducommun's move is inextricably linked to its VISION 2027 plan, a multi-year strategy designed to elevate the company's revenue and margin profile. The plan targets $950 million to $1 billion in revenue and an 18% adjusted EBITDA margin by 2027—a significant leap from its current performance. The two primary levers for achieving this are a strategic expansion of its higher-margin Engineered Products and a growth in its aftermarket business.

The company aims to have Engineered Products—proprietary, high-value components and systems—account for over 25% of total revenue. This is where the new “firepower” becomes critical. Organic growth alone is unlikely to hit that target within the desired timeframe. History shows Ducommun has leveraged acquisitions to build this part of its portfolio, and the new credit facility signals a clear intent to accelerate that playbook. The capital provides the means to hunt for and acquire the kind of specialized, tech-forward firms with low capital intensity that can be seamlessly integrated to boost margins and market share.

With M&A activity in the aerospace and defense sector rebounding strongly in 2025, driven by rising global defense budgets and a recovering commercial aviation market, Ducommun is now positioned as a credible buyer. The company can target businesses with differentiated intellectual property in high-growth areas like autonomous systems, advanced electronics, or specialized structural components, thereby strengthening its moat against competitors.

A Masterclass in Market Timing

Beyond the strategic implications, the deal represents a savvy financial maneuver. Oswald’s comment about taking “full advantage of favorable market conditions” is substantiated by broader industry trends. The A&D sector has outperformed the broader market through much of 2025, with defense indices surging on the back of increased geopolitical tensions and sustained budget growth. This strong sector performance has made lenders more confident and willing to offer attractive terms to financially sound operators like Ducommun.

The company successfully locked in lower interest rate spreads, which will translate into immediate cost savings starting in 2026. The previous facility, established in mid-2022, carried a variable rate of Term SOFR plus 1.625%. The new facility starts at Term SOFR plus 1.50%, with pricing further tied to leverage ratios, rewarding the company for its disciplined financial management. This reduction in the cost of capital, combined with the extension of its debt maturity to 2030, significantly de-risks the balance sheet.

Ducommun's financial health provided the foundation for this advantageous deal. The company has steadily improved its debt-to-equity ratio over the past five years and maintains a solid interest coverage ratio. Its record remaining performance obligations (RPO) of $1.03 billion, reported in Q3 2025, provides strong revenue visibility that undoubtedly appealed to its banking syndicate. By acting now, Ducommun has fortified its financial structure for the second half of the decade, securing low-cost capital before any potential shifts in the credit market.

Fortifying the Foundation for Long-Term Growth

While the headline is about M&A firepower, the new facility's benefits are more profound. The improved covenants grant Ducommun greater operating flexibility, reducing constraints and allowing management to run the business more dynamically. This freedom is crucial as the company continues its internal optimization efforts, such as consolidating manufacturing footprints from higher-cost locations to more efficient facilities in the U.S. and Mexico—a program expected to yield millions in annual savings.

This enhanced financial stability allows the 176-year-old company to weather market cycles while investing in innovation and customer programs. For a Tier 2 supplier embedded in mission-critical platforms across commercial and military aviation, long-term reliability is paramount. A stronger balance sheet and secured, flexible financing send a powerful signal of stability to its prime customers like Boeing, Lockheed Martin, and Raytheon.

In a competitive landscape populated by rivals like Triumph Group and Astronics Corporation, this financial reinforcement is a key differentiator. It allows Ducommun to move beyond merely fulfilling orders to proactively shaping its future. The capital isn't just for buying other companies; it's for investing in the engineering, technology, and operational excellence needed to win next-generation programs. This move demonstrates that Ducommun is not content to be a passive component supplier but is actively managing its capital structure to become a more powerful and integrated partner in the aerospace and defense value chain.