Business Context and Reporting Period
ExlService Holdings, Inc. filed this Form 8-K on November 21, 2017, to report the entry into a new material definitive agreement and the termination of a prior credit facility. The company is incorporated in Delaware and operates from New York, New York.
Key Financial Metrics and Debt Structure
- New Credit Facility: Established a $200,000,000 revolving credit facility with an option to increase commitments by up to $100,000,000.
- Maturity Date: November 21, 2022.
- Interest Rates:
- Alternate Base Rate (ABR) Loans: Prime rate plus 0.00% to 0.75% margin.
- Eurodollar Loans: Adjusted LIBO rate plus 1.00% to 1.75% margin.
- Commitment Fee: 0.15% to 0.30% per annum on unused commitments.
- Transaction Costs: Paid $515,000 in syndication fees and approximately $160,000 in reimbursed expenses.
- Collateral: Secured by all or substantially all assets of the Company and its wholly owned material domestic subsidiaries.
Material Changes Versus Prior Period
The Company utilized the new Credit Agreement to refinance and repay in full its prior credit agreement dated October 24, 2014, with JPMorgan Chase Bank, N.A. The prior agreement was terminated immediately upon the closing of the new facility. The new agreement replaces the previous debt structure with a larger revolving facility and updated interest rate margins tied to the Company's total net leverage ratio.
Covenants, Risks, and Management Commentary
- Financial Covenants:
- Interest Coverage Ratio: Must not be less than 3.5 to 1.0 (EBITA to cash interest expense).
- Total Net Leverage Ratio: Must not exceed 3.0 to 1.0 (Total funded indebtedness less unrestricted domestic cash up to $50 million, to EBITDA).
- Restrictive Covenants: Includes limitations on incurring additional indebtedness, creating liens, making certain investments, paying dividends, and undertaking mergers or asset dispositions.
- Events of Default: Includes nonpayment, breach of covenants, cross-defaults, change of control, and bankruptcy events. Default may lead to acceleration of obligations.
- Use of Proceeds: Used to refinance existing debt and for working capital, general corporate purposes, and permitted acquisitions.
The filing does not provide specific revenue, profit, or cash flow figures for the reporting period, as this is a current report regarding a financing transaction rather than a periodic financial statement.
Key Facts for Investor Verification
- Verify the Company's current Total Net Leverage Ratio and Interest Coverage Ratio to ensure compliance with the new 3.0x and 3.5x covenants, respectively.
- Confirm the utilization rate of the new $200 million facility and any outstanding letters of credit.
- Review the full text of the Credit Agreement (to be filed in the 2017 Form 10-K) for specific definitions of EBITDA and EBITA used in covenant calculations.
- Monitor the Company's ability to maintain unrestricted domestic cash below the $50 million threshold allowed for leverage ratio calculations.