Business Context and Reporting Period
This Form 8-K Current Report was filed by Artisan Partners Asset Management Inc. on August 16, 2017. The filing details material definitive agreements entered into by Artisan Partners Holdings LP ("Holdings"), the parent entity of which the Company is the sole general partner. The primary events involve the refinancing of senior notes and the extension of a revolving credit facility.
Key Financial Metrics and Debt Structure
- Series D Senior Notes: Issued $60 million in 4.29% Series D Senior Notes maturing on August 16, 2025.
- Repayment of Prior Debt: Proceeds from the Series D issuance were used to repay $60 million of 4.98% Series A Senior Notes maturing on August 16, 2017.
- Revolving Credit Facility: Amended and extended a $100 million five-year revolving credit facility. As of the filing date, there were no outstanding borrowings under this facility.
- Interest Rates (Credit Facility): Borrowings bear interest at LIBOR plus a margin of 1.50% to 2.50% or an alternate base rate plus a margin of 0.50% to 1.50%, depending on the leverage ratio.
- Unused Commitment Fees: Range from 0.175% to 0.500% per annum based on the leverage ratio.
Material Changes Versus Prior Period
The filing represents a refinancing event rather than a change in operating performance. The material change is the replacement of the 4.98% Series A Senior Notes with the 4.29% Series D Senior Notes, resulting in a reduction of the interest rate on this specific debt tranche by 69 basis points and an extension of the maturity date by eight years (from 2017 to 2025). Additionally, the revolving credit facility, originally scheduled to terminate on August 16, 2017, has been extended for an additional five-year term.
Financial Covenants, Risks, and Contingencies
The Note Purchase Agreement and the Amended Credit Agreement include specific financial covenants and contingencies:
- Leverage Ratio: Holdings must not permit its Leverage Ratio to exceed 3.00 to 1.00.
- Interest Coverage Ratio: Holdings must not permit its Interest Coverage Ratio for any four consecutive fiscal quarters to be less than 4.00 to 1.00.
- Prepayment Triggers: Holdings is generally required to offer to pre-pay the notes in the event of a Change of Control or if Artisan's average Assets Under Management (AUM) for a fiscal quarter falls below $45 billion.
- Guarantees: Artisan Partners Limited Partnership, a wholly-owned subsidiary of Holdings, has guaranteed obligations under both the Note Purchase Agreement and the Credit Agreement.
- Events of Default: Both agreements include customary events of default, upon which outstanding notes generally become due and payable.
The filing text does not provide specific values for current revenue, profit, cash flow, or total liquidity beyond the debt instruments described.
Key Facts for Investor Verification
- Verify the current Assets Under Management (AUM) to assess proximity to the $45 billion prepayment trigger threshold.
- Confirm the current Leverage Ratio and Interest Coverage Ratio to ensure compliance with the 3.00:1.00 and 4.00:1.00 covenants, respectively.
- Review the full text of Exhibit 10.1 (Note Purchase Agreement) and Exhibit 10.2 (Credit Agreement) for detailed definitions of financial metrics and events of default.
- Monitor the interest rate environment, as the revolving credit facility rates are variable based on LIBOR and the company's leverage ratio.