Business Context and Reporting Period
This Form 8-K was filed by HC2 Holdings, Inc. (trading symbol: HCHC) on March 16, 2020, reporting events occurring on March 13, 2020. The filing details the termination of a previous credit facility and the execution of a new secured revolving credit agreement.
Key Financial Metrics
The filing does not provide revenue, profit, cash flow, or margin data. The primary financial metric disclosed is the establishment of a new $15 million secured revolving credit facility.
- New Facility Size: $15 million
- Interest Rate: LIBOR (1, 2, or 3-month) plus 6.75% margin; or Base Rate plus 5.75% margin if LIBOR is unavailable.
- Undrawn Commitment Fee: 1.00% per annum on the undrawn portion.
- Maturity Date: June 1, 2021.
- Security Status: Secured by the same collateral as the 11.500% Senior Secured Notes due 2021; classified as "First-Out Debt" and "Pari Passu Obligations."
Material Changes
On March 3, 2020, the company permanently repaid its previous $15 million secured revolving credit agreement (entered into April 3, 2019) using proceeds from the sale of 100% of its equity interest in the Global Marine Group. On March 13, 2020, the company replaced this facility with a new $15 million agreement with the same lender, MSD PCOF Partners IX, LLC.
Guidance, Outlook, and Risks
Use of Proceeds: The company intends to use the new facility for working capital and general corporate purposes. Borrowed amounts may be re-borrowed until maturity.
Risks and Contingencies:
- Default Consequences: An event of default allows the lender to terminate commitments and declare all unpaid principal and interest immediately due.
- Bankruptcy Trigger: If the company becomes subject to an order of relief under the U.S. bankruptcy code, commitments automatically terminate and all obligations become immediately due.
- Covenants: The agreement contains financial covenants substantially similar to those in the indenture governing the Secured Notes.
Investor Verification Checklist
- Verify the status of the 11.500% Senior Secured Notes due 2021 and any potential cross-default implications.
- Confirm the final closing details of the Global Marine Group sale to J.F. Lehman & Company, LLC.
- Review the specific financial covenants in the new agreement to assess compliance risks.
- Monitor the company's liquidity position given the high interest rate margin (6.75% over LIBOR).