Business Context and Reporting Period
This Form 8-K, dated September 1, 2021, reports on American Public Education, Inc. (APEI), a Delaware corporation. The filing details the completion of a major acquisition and the associated financing arrangements executed on the Closing Date of September 1, 2021.
Key Financial Metrics and Transaction Details
- Acquisition Target: Rasmussen University, a nursing- and health sciences-focused institution with approximately 18,000 students across 23 campuses and online.
- Purchase Price: $329 million in cash. APEI elected to pay the full amount in cash rather than a mix of cash and preferred stock.
- Debt Financing: APEI entered into a Credit Agreement to fund the acquisition, consisting of:
- Term Loan: $175.0 million senior secured term loan, fully funded on the Closing Date.
- Revolving Credit Facility: $20.0 million commitment, including a $5.0 million swing line subfacility.
- Interest Rates: LIBOR (with a 0.75% floor) plus 5.50% or Base Rate plus 4.50%.
- Maturities: Term Loan matures September 1, 2027; Revolving Credit Facility matures September 1, 2026.
- Financial Covenants: APEI must maintain a Total Net Leverage Ratio of no greater than 2.0 to 1.0.
Material Changes and Obligations
The primary material change is the consolidation of Rasmussen University into APEI's portfolio, significantly expanding its student base and geographic footprint. To facilitate this, APEI incurred substantial new debt obligations. The Term Loan requires quarterly principal payments of $2,187,500 commencing December 31, 2021. Additionally, the company is subject to mandatory prepayment requirements based on excess cash flow if the First Lien Net Leverage Ratio exceeds specific thresholds (0.5 to 1.0 or 0.75 to 1.0).
Outlook, Risks, and Contingencies
The filing notes that pro forma financial information and financial statements of the acquired business will be filed in a subsequent amendment to this report. Key risks and contingencies include:
- Leverage Constraints: The new debt load subjects APEI to strict leverage ratios and limits on incurring additional debt, making investments, or paying dividends.
- Collateral: The new facilities are secured by a pledge of substantially all of APEI's assets and those of its subsidiaries.
- Default Provisions: The Credit Agreement contains standard events of default that could lead to the acceleration of all outstanding amounts.
- Prepayment Penalties: Voluntary prepayments of the Term Loan made within six months of the Closing Date are subject to a 1.0% premium.
Investor Verification Checklist
- Verify the pro forma financial impact of the acquisition once the amendment to this 8-K is filed.
- Monitor APEI's ability to maintain the Total Net Leverage Ratio below 2.0 to 1.0 given the new $175 million term loan.
- Review the integration plan for Rasmussen University to assess potential synergies and operational challenges.
- Confirm the status of the $20 million revolving credit facility and whether it remains undrawn for liquidity purposes.
- Check for any subsequent filings regarding the financial statements of Rasmussen University required under Item 9.01(a).