Business Context and Reporting Period
This Form 8-K was filed by Greatbatch, Inc. on June 24, 2011. The filing reports the entry into a material definitive agreement by Greatbatch Ltd. (the Borrower), a subsidiary of Greatbatch, Inc., to restructure its credit facilities.
Key Financial Metrics and Debt Structure
The filing details the replacement of a $235 million credit agreement (dated May 22, 2007) with a new $400 million secured revolving credit facility (the "2011 Credit Agreement").
- Total Facility: $400 million secured revolving credit facility.
- Subfacilities: Includes a $15 million letter of credit subfacility and a $15 million swingline subfacility.
- Maturity Date: June 24, 2016, unless the 2007 Debentures are not repaid or refinanced by March 1, 2013, in which case the maturity accelerates to March 1, 2013.
- Interest Rates: Variable rates based on Prime or LIBOR plus an applicable margin ranging from 0.000% to 3.000% depending on the total leverage ratio.
- Commitment Fee: Ranges between 0.175% and 0.250% based on the total leverage ratio.
Material Changes Versus Prior Period
The primary material change is the increase in available credit capacity from $235 million to $400 million. The new agreement introduces specific financial covenants and flexibility for corporate actions that were not explicitly detailed in the summary of the prior 2007 agreement.
Guidance, Covenants, and Management Commentary
The 2011 Credit Agreement imposes strict financial covenants and outlines specific permitted expenditures:
- Financial Covenants:
- Interest Coverage Ratio: Must maintain a ratio of adjusted EBITDA to interest expense of at least 3.00 to 1.00.
- Total Leverage Ratio: Must not exceed 4.50 to 1.00 through December 30, 2011, and not exceed 4.00 to 1.00 thereafter.
- Permitted Expenditures (Subject to Conditions):
- Acquisitions up to $250 million.
- Other investments up to $60 million.
- Stock repurchases up to $60 million.
- Repurchase of up to $198 million of 2007 Convertible Subordinated Debentures.
- Reset Option: If the Total Leverage Ratio falls below 2.75 to 1.00, the Borrower may elect to reset the expenditure limits listed above.
The filing does not provide specific revenue, profit, or cash flow figures for the reporting period.
Important Facts for Investor Verification
- Verify the current status of the $198 million 2007 Convertible Subordinated Debentures to determine if the credit facility maturity date is at risk of acceleration to March 1, 2013.
- Monitor the company's Total Leverage Ratio to ensure compliance with the 4.00 to 1.00 covenant threshold effective December 31, 2011.
- Confirm whether the company intends to utilize the new facility for the permitted $250 million in acquisitions or $60 million in stock repurchases.
- Review the full text of Exhibit 10.1 for specific definitions of "adjusted EBITDA" and other covenant calculations.