Business Context and Reporting Period
This Form 8-K Current Report was filed by Morningstar, Inc. on November 4, 2016. The filing discloses the entry into a Material Definitive Agreement involving an amended and restated credit facility with Bank of America, N.A.
Key Financial Metrics and Debt Structure
- Facility Capacity: A three-year revolving credit facility with a total borrowing capacity of up to $300 million.
- Letters of Credit: Provision for the issuance of up to $25 million in letters of credit under the facility.
- Outstanding Balance: As of November 4, 2016, the aggregate principal balance outstanding was $60 million.
- Interest Rates: Loans are priced at LIBOR plus 1.00% to 1.75% or Base Rate plus 2.00% to 2.75%, depending on the consolidated leverage ratio.
- Financial Covenants: Maximum consolidated leverage ratio of 3.00 to 1.00; minimum consolidated interest coverage ratio of 3.00 to 1.00.
Material Changes and Strategic Intent
The company amended its prior credit agreement (dated July 18, 2014) to secure funding for specific strategic initiatives. The primary intended use of additional borrowings is to fund the planned acquisition of the remaining ownership interest in PitchBook Data, Inc., estimated at approximately $180 million (subject to working capital adjustments). Remaining capacity is designated for working capital, capital expenditures, and other corporate purposes.
Management Commentary, Risks, and Contingencies
The agreement includes customary covenants restricting the company's ability to incur additional indebtedness, liens, or make certain investments and asset dispositions without compliance. Events of default include non-payment, breach of covenants, insolvency, and change of control. The obligations are unconditionally guaranteed by subsidiaries Morningstar Investment Management LLC and Morningstar Research Services LLC, with future guarantees extending to domestic subsidiaries contributing 10% or more of consolidated revenue.
Key Facts for Investor Verification
- Verify the final purchase price and closing date for the remaining ownership interest in PitchBook Data, Inc.
- Monitor the company's consolidated leverage ratio to ensure compliance with the 3.00 to 1.00 maximum covenant.
- Confirm the utilization of the $300 million facility beyond the initial $60 million outstanding balance.
- Review the full text of Exhibit 10.1 for specific definitions of "restricted payments" and affiliate transaction limitations.