Business Context and Reporting Period
This Form 8-K filing by Wright Express Corporation (WEX Inc.) covers events occurring on May 20, 2011, and May 23, 2011. The report details the entry into a new material credit agreement, the termination of prior debt facilities, and the results of the 2011 Annual Meeting of Shareholders.
Key Financial Metrics and Debt Structure
The filing establishes a new capital structure with the following terms:
- Total Facility Size: $900 million total, comprising a $200 million five-year term loan and a $700 million five-year unsecured revolving credit facility.
- Sublimits: The revolving facility includes a $100 million sublimit for letters of credit and a $20 million sublimit for swingline loans.
- Expansion Option: The Company may increase the facility by up to an additional $100 million subject to conditions.
- Interest Rates: Variable rates based on Eurocurrency Rate or Prime/Federal Funds Rate plus a margin ranging from 0.25% to 2.25%, dependent on the leverage ratio.
- Commitment Fee: Quarterly fee ranging from 0.20% to 0.40% on the unused portion of the facility.
- Maturity: May 23, 2016.
Material Changes Versus Prior Period
The Company refinanced its existing indebtedness under the 2007 and 2010 credit facilities with Bank of America, N.A. All balances under these prior facilities have been paid in full, and the obligations have been satisfied. Proceeds from the new facility were used for this refinancing and may be used for working capital, acquisitions, dividends, and general corporate purposes.
Guidance, Covenants, and Shareholder Actions
Financial Covenants: The Company must maintain specific ratios at the end of each fiscal quarter:
- Interest Coverage: Consolidated EBIT to consolidated interest charges ratio of no less than 3.00 to 1.00.
- Leverage Ratio: Consolidated funded indebtedness to consolidated EBITDA ratio of no more than 3.25 to 1.00 (elective increase to 3.75 to 1.00 permitted for certain acquisitions).
Dividend Restrictions: Restricted payments (including cash dividends) are permitted only if the Company is in compliance with a 1.75:1.00 Consolidated Leverage Ratio, or up to $25 million annually if in pro forma compliance with financial ratios.
Shareholder Vote Results (May 20, 2011):
- Director Elections: Rowland T. Moriarty, Ronald T. Maheu, and Michael E. Dubyak were elected as Class III directors.
- Executive Compensation: The advisory proposal on executive compensation was approved (approx. 92% For).
- Frequency of Say-on-Pay: Shareholders voted to hold future advisory votes on executive compensation every year (approx. 81% For).
- Auditor Ratification: Deloitte & Touche, LLP was ratified as the independent auditor.
Investor Verification Checklist
- Verify the Company's current Consolidated Leverage Ratio to ensure compliance with the 3.25:1.00 covenant and the 1.75:1.00 threshold for cash dividends.
- Confirm the actual drawdown amounts on the $200 million term loan and $700 million revolver to assess current debt load.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific definitions of "Consolidated EBITDA" and "Consolidated Funded Indebtedness."
- Monitor the status of the 65% stock pledge of Wright Express Australia Holdings Pty Ltd as security for the obligations.
- Check for any subsequent filings regarding the utilization of the $100 million expansion option.