Business Context and Reporting Period
This Form 8-K Current Report is filed by Wright Express Corporation (not WEX Inc.) on May 22, 2007. The filing discloses the entry into a new material definitive agreement and the termination of a prior credit facility.
Key Financial Metrics and Obligations
- New Credit Facility: A five-year, unsecured revolving credit facility of $350 million.
- Sublimits: Includes a $100 million sublimit for letters of credit and a $10 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:
- LIBOR-based: LIBOR plus a margin of 0.45% to 1.125%.
- Base Rate: Higher of Federal Funds Rate + 0.50% or Prime Rate, plus a margin of up to 0.125%.
- Commitment Fee: Quarterly fee ranging from 0.10% to 0.20% on the daily unused portion.
- Maturity Date: May 22, 2012.
- Guarantor: Wright Express Fueling Solutions, Inc. (wholly-owned subsidiary).
Material Changes Versus Prior Period
The Company terminated its existing credit facility with JPMorgan Chase Bank, N.A. (the "2005 Facility"). All balances owed under the 2005 Facility were paid in full using proceeds from the new $350 million facility. The new agreement replaces the previous indebtedness structure.
Covenants, Risks, and Management Commentary
The new Credit Agreement imposes specific financial covenants that must be maintained at the end of each fiscal quarter:
- Interest Coverage Ratio: Consolidated EBIT to consolidated interest charges must be no less than 3.00 to 1.00.
- Leverage Ratio: Consolidated funded indebtedness to consolidated EBITDA must be no more than 3.00 to 1.00.
Permitted Uses of Proceeds: Working capital, acquisitions, payment of dividends, refinancing of indebtedness, and general corporate purposes.
Events of Default: Include non-payment, covenant violations, cross-defaults, bankruptcy, and regulatory enforcement actions against the subsidiary Wright Express Financial Services Corporation.
Investor Verification Checklist
- Verify the Company's current consolidated EBIT and EBITDA to ensure compliance with the 3.00x interest coverage and leverage covenants.
- Confirm the exact amount of indebtedness refinanced from the 2005 Facility versus the amount retained for working capital.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific definitions of "Change in Control" and "restricted payments."
- Monitor the status of Wright Express Financial Services Corporation for any regulatory enforcement actions that could trigger a default.