Business Context and Reporting Period
Company: HMS Income Fund, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 16, 2013
Event: Entry into a Material Definitive Agreement (Amendment of Credit Facility).
Key Financial Metrics and Facility Terms
This filing details the terms of a credit facility amendment rather than periodic financial performance metrics (revenue, profit, cash flow). Key facility terms include:
- Borrowing Capacity: Increased from $15 million to $25 million.
- Interest Rates: LIBOR + 2.75% or Base Rate + 1.5%.
- Unused Commitment Fee: 0.25% per annum.
- Collateral: Secured by all Company assets and future subsidiary assets/equity.
- Accordion Provision: Allows potential increase of up to an additional $50 million (total facility up to $75 million).
- Maturity Date: May 24, 2015 (with two one-year extension options).
Material Changes Versus Prior Period
The primary material change is the expansion of the Company's credit facility:
- Capacity Increase: The amendment exercised the right to increase the total borrowing limit by $10 million.
- Covenant Additions: New covenants were added to protect lender security interests regarding the investment adviser (HMS Adviser LP), including notification requirements for adviser-related events and a requirement for lender approval for material amendments to the Advisory Agreement.
- Default Provisions: Failure to cause the Adviser to comply with control and custodial agreements is now explicitly defined as an event of default.
Guidance, Outlook, and Risks
Covenants and Compliance: The Company must maintain specific financial ratios:
- Interest coverage ratio of at least 2.0 to 1.0.
- Asset coverage ratio of at least 2.25 to 1.0.
- Minimum adjusted tangible net worth of at least 80% of the closing date value.
Risks and Contingencies: The filing outlines standard default provisions, including payment defaults, insolvency, material adverse changes in business, or covenant breaches. The new amendment specifically heightens the risk of default related to the relationship and compliance of the investment adviser.
Management Commentary: The filing does not contain forward-looking guidance on earnings or market outlook; it is strictly a disclosure of the credit agreement amendment.
Important Facts for Investor Verification
- Verify the Company's current utilization of the $25 million facility and whether the accordion provision has been triggered.
- Confirm compliance with the new covenants regarding the investment adviser (HMS Adviser LP).
- Review the Company's ability to maintain the required interest coverage (2.0:1) and asset coverage (2.25:1) ratios.
- Note that the filing does not provide current revenue, profit, or cash flow figures; these must be sourced from the most recent 10-Q or 10-K.