Business Context and Reporting Period
Company: Deluxe Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: September 21, 2016
Event: Entry into a Material Definitive Agreement (Omnibus Amendment No. 3 to Credit Agreement).
Key Financial Metrics and Debt Structure
- New Term Loan Facility: $200,000,000 aggregate principal amount.
- Outstanding Debt: Approximately $423.0 million under the Amended Credit Agreement as of the filing date.
- Net Available Borrowings: Approximately $89.2 million.
- Interest Rate: Adjusted LIBOR plus 1.50% to 2.125% (or adjusted base/prime rate plus 0.50% to 1.125%), dependent on the Leverage Ratio.
- Maturity Date: February 21, 2019 (unchanged).
- Collateral: Security interest in substantially all personal property of the Company and domestic material subsidiaries.
Material Changes and Strategic Actions
The Company amended its existing credit agreement to establish a new term loan facility. The primary purpose of this facility is to fully repay obligations under the Company's 6.000% Senior Notes due 2020. The Company intends to redeem these notes on November 15, 2016. The term loan facility will be fully drawn upon funding, and amounts repaid or prepaid may not be reborrowed.
Guidance, Covenants, and Risks
- Financial Covenants: The agreement requires maintenance of a maximum Leverage Ratio and a minimum ratio of Consolidated EBIT to Consolidated Interest Expense.
- Cross-Default Provisions: Failure to pay principal or interest on other indebtedness exceeding $35 million, or a breach permitting acceleration of at least that amount, will trigger a default under the Amended Credit Agreement.
- Restrictive Covenants: Limitations on additional indebtedness, liens, investments, acquisitions (excluding capital expenditures), mergers, and asset sales outside the ordinary course of business.
- Change in Control: The agreement contains provisions regarding a "Change in Control" of the Company.
- Related Parties: Certain parties to the Amended Credit Agreement are customers of the Company in the ordinary course of business.
Investor Verification Checklist
- Verify the execution of the redemption of the 6.000% Senior Notes due 2020 on November 15, 2016.
- Confirm the Company's compliance with the new Leverage Ratio and EBIT/Interest Expense covenants in subsequent filings.
- Review the full text of Exhibit 10.1 for specific definitions of "material subsidiaries" and excluded assets.
- Monitor the Company's liquidity position given the non-reborrowable nature of the new term loan.