Alignment Healthcare, Inc. — Form 8-K Summary
Business context and reporting period
Alignment Healthcare, Inc. filed this Current Report on Form 8-K on September 6, 2022, reporting events effective September 2, 2022. The filing concerns a new term loan facility and the creation of a direct financial obligation. Alignment Healthcare USA, LLC, an indirect subsidiary, is the borrower.
Financing and key financial terms
- Lenders agreed to provide up to $250.0 million in term loans.
- The borrower received an initial term loan of $165.0 million on September 2, 2022, with an additional $85.0 million available at the borrower’s option through delayed-draw term loans.
- Interest is based on one-month SOFR, subject to a 1.00% floor, plus a 6.50% margin. The stated rate is therefore at least 7.50% before any default-rate adjustment.
- All outstanding principal and accrued interest are due on September 1, 2027.
- Approximately $159.3 million of the initial proceeds was used to repay the existing CRG Servicing term loan, including principal, accrued interest, payment-in-kind interest and fees. Remaining proceeds may support working capital, corporate purposes, permitted acquisitions and investments, capital expenditures, and transaction costs.
- The company and certain subsidiaries guarantee the obligations. Substantially all assets of the borrower parties secure the facility, including certain intellectual property and equity interests in specified subsidiaries.
- Health plan subsidiaries and other regulated entities are not guarantors.
Material changes, outlook and risks
- The financing replaced the company’s existing CRG Servicing term loan with a new facility and provided potential additional borrowing capacity.
- Delayed-draw borrowings are subject to conditions and a maximum pro forma debt-to-trailing-twelve-month-revenue ratio. Draws are generally capped at $50.0 million through June 30, 2024, unless used for permitted acquisitions, and at $35.0 million on or after July 1, 2024.
- The borrower must maintain minimum liquidity of $23.0 million and comply with maximum debt-to-trailing-twelve-month-revenue requirements.
- The agreement restricts additional indebtedness and liens, distributions, acquisitions, investments and other restricted payments.
- Some prepayments made before the second anniversary may incur a fee of 1.00% to 2.00% of the prepaid principal. Certain asset-sale proceeds must be used to prepay the loans.
- Events of default include payment, covenant, judgment, insolvency, bankruptcy and change-of-control events. A default may accelerate the debt, terminate remaining commitments and permit foreclosure on collateral. During a default, interest increases by 2.00% annually above the otherwise applicable rate.
- The filing does not provide revenue, profit, cash flow, margin or broader operating guidance for the reporting period.
Most important facts to verify
- Outstanding balance and interest rate, including the applicable SOFR level and any future delayed draws.
- Compliance with the $23.0 million minimum-liquidity covenant and debt-to-revenue covenant.
- Collateral coverage and the entities excluded from guarantees, particularly regulated health plan subsidiaries.
- Use of remaining financing proceeds and any permitted acquisitions or investments.
- Full terms of the Loan Agreement and Security Agreement, which the company stated would be filed as exhibits to its Form 10-Q for the quarter ending September 30, 2022.