Steris Plc Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Steris Plc on March 19, 2021. The filing details the entry into several material definitive agreements to secure financing for the proposed acquisition of Cantel Medical Corp. ("Cantel") and to refinance existing indebtedness.
Key Financial Metrics and Debt Facilities
The filing outlines the establishment of three primary credit facilities and amendments to existing note purchase agreements:
- Delayed Draw Term Loan: A $750 million facility to fund the cash consideration for the Cantel acquisition and refinance Cantel's existing debt. Funding is contingent on the acquisition closing.
- Term Loan: A $550 million facility replacing the existing term loan agreement dated November 18, 2020.
- Revolving Credit Facility: A $1,250 million facility replacing the existing credit agreement dated March 23, 2018. This facility may be increased by up to $625 million at the lenders' discretion.
- Note Purchase Agreement Amendments: Amendments to 2012, 2015, and 2017 note agreements allowing for the netting of cash proceeds from qualifying capital markets events when calculating leverage ratios.
Repayment Terms: All three new facilities mature five years after their respective closing dates. Principal payments are deferred for the first four fiscal quarters post-closing. Subsequent quarterly payments are 1.25% of the original principal for quarters 5-12, increasing to 1.875% for quarters 13 through maturity.
Material Changes Versus Prior Period
The primary material change is the restructuring of Steris's debt profile to support the Cantel acquisition. The company replaced its existing term loan and revolving credit agreement with larger facilities. The new agreements introduce specific financial covenants, including limitations on leverage and required minimum interest coverage, effective upon funding.
Guidance, Outlook, and Risks
Management Commentary: The proceeds from the Delayed Draw Term Loan and Revolver are designated for the Cantel acquisition, refinancing existing indebtedness, transaction expenses, and general corporate purposes.
Risks and Contingencies: The agreements contain customary Events of Default, including payment defaults, covenant breaches, change of control, and failures to pay money judgments. A specific default trigger includes failures to pay Material Indebtedness (defined as indebtedness exceeding the greater of $150 million or 3% of Consolidated Total Assets). Upon default, lenders may accelerate the maturity of obligations.
Key Facts for Investor Verification
- Verify the total committed debt capacity of $2.55 billion ($750M + $550M + $1,250M) and the potential increase of $625 million to the revolver.
- Confirm the specific leverage and interest coverage ratios required under the new financial covenants.
- Monitor the status of the Cantel Medical Corp. acquisition, as the $750 million Delayed Draw Term Loan is contingent on its closing.
- Review the impact of the Note Purchase Agreement Amendments on the company's reported leverage ratio calculations.