Business Context and Reporting Period
This Form 8-K, dated November 13, 2019, is filed by TPG Pace Holdings Corp. (the "Company") regarding its proposed Business Combination with Accel Entertainment, Inc. ("Accel"). The filing details the entry into a new Credit Agreement by New Pace LLC ("NewCo"), a wholly-owned subsidiary of the Company, to refinance existing facilities and facilitate the closing of the merger with Accel.
Key Financial Metrics and Debt Structure
The filing outlines a new credit facility structure totaling $465.0 million, secured by substantially all assets of NewCo and Accel's subsidiaries. The specific components are:
- Revolving Credit Facility: $100.0 million (includes a $10.0 million letter of credit sublimit and a $10.0 million swing line sublimit).
- Initial Term Loan Facility: $240.0 million.
- Additional Term Loan Facility: $125.0 million (available until the first anniversary of the Closing Date).
Interest Rates and Fees: Borrowings bear interest based on LIBOR or an Alternative Base Rate (ABR) plus a margin. Until initial financial statements are delivered, margins are 2.25% for LIBOR and 1.25% for ABR. Margins adjust based on the First Lien Net Leverage Ratio, ranging from 1.75% to 2.75% for LIBOR and 0.75% to 1.75% for ABR. Commitment fees range from 0.25% to 0.50%.
Amortization and Maturity: Term loans amortize at approximately 5.00% per annum. All loans mature on the fifth anniversary of the Closing Date.
Covenants: The agreement requires maintaining a First Lien Net Debt to Consolidated EBITDA ratio no greater than 4.50:1.00 and a Consolidated EBITDA to Consolidated Fixed Charges ratio no less than 1.20:1.00.
Material Changes and Transaction Status
The primary material change is the execution of the Credit Agreement on November 13, 2019, replacing or refinancing prior arrangements to support the Business Combination. Additionally, the Company announced that, based on shareholder redemptions and cash elections, it anticipates satisfying the Minimum Cash condition required to close the Business Combination with Accel.
Outlook, Risks, and Contingencies
Outlook: Management expects sufficient cash to consummate the Business Combination, subject to the satisfaction or waiver of all other conditions in the Transaction Agreement.
Risks and Contingencies: The filing includes extensive forward-looking statements and risk factors, including:
- Termination of the Transaction Agreement or failure to complete the Business Combination.
- Disruption of Accel's or the Company's current operations.
- Inability to complete private placements or meet NYSE listing standards post-merger.
- Failure to retain key employees or realize anticipated synergies.
- Legal challenges or litigation related to the merger.
Unusual Items: The filing notes that the Credit Agreement contains customary negative covenants limiting additional indebtedness, dividends, asset sales, and affiliate transactions.
Investor Verification Checklist
- Verify the final status of the Minimum Cash condition and shareholder redemption rates.
- Review the definitive proxy statement/prospectus (Form S-4) for detailed terms of the Business Combination.
- Confirm the exact closing date of the Business Combination to determine the start of the loan amortization and maturity schedule.
- Monitor the post-closing First Lien Net Leverage Ratio to assess potential interest rate adjustments.
- Check for any litigation or regulatory hurdles that could delay or terminate the merger.