Business Context and Reporting Period
Science Applications International Corporation (SAIC) filed this Form 8-K on March 17, 2015. The filing reports the entry into an Amended & Restated Credit Agreement to facilitate the proposed acquisition of Scitor Holdings, Inc. (Scitor) via a merger.
Key Financial Metrics and Debt Structure
The Amended Credit Agreement establishes the following credit facilities, maturing on September 27, 2018:
- Revolving Credit Facility: Unsecured, up to $200 million.
- Term Loan A: Unsecured, $500 million.
- Term Loan B (Proposed): Senior secured facility up to $670 million, to be established upon the Merger.
Interest rates remain unchanged from the initial 2013 agreement. Upon the closing of the Term Loan B, the Credit Facilities will become secured by liens on substantially all assets of SAIC and its subsidiaries.
Material Changes and Covenants
The agreement introduces specific financial covenants and structural changes:
- Pre-Term Loan B Covenants: Leverage Ratio not greater than 3.25 to 1.00; Interest Coverage Ratio of at least 3.50 to 1.00.
- Post-Term Loan B Covenants: Senior Secured Leverage Ratio not greater than 4.00 to 1.00 until July 31, 2016, and 3.75 to 1.00 thereafter.
- Additional Restrictions: Mandatory annual prepayment of a portion of Excess Cash Flow and further restrictive covenants regarding fundamental changes and asset dispositions.
Outlook, Risks, and Contingencies
The filing outlines customary events of default, including bankruptcy, nonpayment, cross-defaults, breach of covenants, and material inaccuracy of representations. If an event of default occurs, lenders may terminate commitments and declare all outstanding amounts immediately payable. The transaction is contingent upon the effectiveness of the Merger and the subsequent establishment of the Term Loan B.
Investor Verification Checklist
- Verify the status of the Agreement and Plan of Merger with Scitor Holdings, Inc. dated March 1, 2015.
- Confirm the timing and conditions for the closing of the $670 million Term Loan B.
- Review the full text of the Amended & Restated Credit Agreement (Exhibit 10.1) for detailed definitions of Leverage Ratio, Interest Coverage Ratio, and Excess Cash Flow.
- Assess the impact of the new senior secured liens on SAIC's existing asset base.