CDW Corp Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by CDW Corporation on May 19, 2011, regarding events occurring on April 20, 2011, and May 19-20, 2011. The filing details a material definitive agreement involving the issuance of new debt and a concurrent tender offer to retire existing higher-interest debt.
Key Financial Metrics and Debt Structure
- New Debt Issuance: CDW Escrow Corporation issued an additional $450 million aggregate principal amount of 8.5% Senior Notes due 2019.
- Debt Refinancing: Proceeds from the new issuance were used to fund a tender offer for approximately $412.8 million of existing senior notes carrying interest rates of 11.00% and 11.50%/12.25% due 2015.
- Interest Rates: The new notes bear interest at 8.5% per annum, payable semi-annually, representing a reduction in interest expense compared to the retired debt.
- Liquidity and Cash Flow: The filing does not provide specific cash flow statements, balance sheet totals, or liquidity ratios. The transaction was structured as a refinancing where gross proceeds were deposited into escrow and subsequently used to pay the tender offer consideration.
Material Changes Versus Prior Period
The primary material change is the restructuring of the company's debt portfolio. CDW successfully tendered approximately 84% of the outstanding aggregate principal amount of its Existing Senior Notes. The company accepted $412,844,000 of these notes on a pro rata basis. This action replaces higher-cost debt (11.00% to 12.25%) with lower-cost debt (8.5%) and extends the maturity date from 2015 to 2019.
Guidance, Outlook, and Risks
Management Commentary and Covenants: The new indenture includes restrictive covenants limiting the ability to incur additional indebtedness, issue preferred stock, pay dividends, create liens, or engage in certain asset transfers and affiliate transactions. These covenants are subject to specific limitations and exceptions.
Registration Rights and Penalties: A Registration Rights Agreement requires the company to file an exchange offer registration statement with the SEC and complete the offer by February 7, 2012. Failure to meet these obligations will result in an interest rate penalty on the new notes, increasing by 0.25% per annum, up to a maximum of 0.50% per annum.
Risks and Contingencies: The indenture contains customary events of default, including failure to pay principal or interest and failure to comply with covenants. In the event of bankruptcy or insolvency, all outstanding notes become immediately due. Additionally, a change of control may allow holders to require repurchase of the notes at 101% of principal plus accrued interest.
Key Facts for Investor Verification
- Verify the total outstanding debt load post-transaction to assess leverage ratios.
- Confirm the exact amount of Existing Senior Notes remaining after the pro rata tender offer acceptance.
- Monitor the company's ability to file the required exchange offer registration statement by February 7, 2012, to avoid interest rate penalties.
- Review the specific covenants in the Supplemental Indenture to understand restrictions on future capital allocation and dividend payments.
- Assess the impact of the interest rate reduction (from ~11-12% to 8.5%) on future earnings per share.