Business Context and Reporting Period
Company: Diebold, Incorporated (Diebold Nixdorf, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: November 23, 2015
Context: The Company entered into definitive financing agreements to fund a tender offer for Wincor Nixdorf Aktiengesellschaft ("Wincor") pursuant to a Business Combination Agreement dated November 23, 2015.
Key Financial Metrics and Debt Structure
This filing details the establishment of new debt facilities rather than reporting operational financial results (revenue, profit, or cash flow). The following debt instruments were established:
- Bridge Credit Agreement: A 364-day unsecured committed increasing rate bridge facility in the principal amount of $500.0 million.
- Bank Credit Agreement (Term Facilities):
- Delayed Draw Term Loan A: 5-year secured facility in the principal amount of $250.0 million.
- Term Loan B: 7-year secured delayed draw facility in the principal amount of $1,591.0 million.
- Existing Facilities Refinancing: The Company anticipates refinancing existing senior unsecured credit facilities totaling $750.0 million ($520 million revolving and $230 million term loan A) into new secured facilities under the Credit Agreement.
Interest Rates: Bridge Loans initially bear interest at LIBOR plus 6.75% per annum, with the margin increasing by 0.50% every 90 days. Credit Agreement borrowings bear interest based on the Company's total net leverage ratio.
Material Changes Versus Prior Period
The filing represents a material change in the Company's capital structure and liquidity position:
- Debt Capacity: Establishment of approximately $2.341 billion in new committed credit facilities (Bridge, Term A, and Term B) specifically for the Wincor acquisition.
- Security Status: Transition from existing senior unsecured credit facilities to new secured facilities (for the Term A and Term B loans), subject to a perfected first priority security interest.
- Covenants: Implementation of new affirmative and negative covenants, including limitations on indebtedness, liens, and asset sales, as well as financial maintenance covenants (maximum consolidated net leverage ratio and minimum consolidated interest coverage ratio) applicable to the Delayed Draw Term Facility.
Guidance, Outlook, and Risks
Management Commentary and Use of Proceeds: Proceeds from the new facilities are designated to fund the Tender Offer for Wincor, refinance Wincor's indebtedness, refinance certain existing Company indebtedness, and pay transaction costs.
Contingencies and Risks:
- Bridge Loan Conversion: Any unpaid principal on the Bridge Loans existing more than twelve months after the Closing Date would automatically convert to a term loan on terms likely significantly less favorable to the Company.
- Financing Uncertainty: While the Company may issue senior unsecured notes to fund the Tender Offer in lieu of Bridge Loans, such issuance is not guaranteed. Failure to secure alternative financing may require utilizing the Bridge Loans.
- Conditions Precedent: Funding is conditioned on the consummation of the Tender Offer, receipt of closing documents, solvency certificates, and the absence of material adverse changes to the Business Combination Agreement.
- Events of Default: The agreements include standard events of default, including cross-defaults to indebtedness in excess of $50 million, bankruptcy, and failure to maintain security interests.
Investor Verification Checklist
- Verify the final terms of the Business Combination Agreement with Wincor Nixdorf Aktiengesellschaft.
- Confirm whether the Company successfully refinanced its existing $750 million senior unsecured facilities or amended them to permit the Tender Offer.
- Monitor the utilization of the $500 million Bridge Facility and the risk of automatic conversion to less favorable terms if not repaid within 12 months.
- Review the Company's ability to meet the new financial maintenance covenants (leverage and interest coverage ratios) post-acquisition.
- Assess the impact of the increased debt load on the Company's liquidity and future cash flow requirements.