Business Context and Reporting Period
EVERTEC, Inc. filed this Form 8-K on November 28, 2018, reporting events that occurred on November 27, 2018. The filing details the entry into a new senior secured credit agreement and the simultaneous termination of the company's previous credit facilities.
Key Financial Metrics and Debt Structure
The company established a new senior secured credit facility structure with a syndicate of lenders led by Bank of America, N.A. The total new debt capacity consists of:
- Term Loan A: $220.0 million, maturing November 27, 2023.
- Term Loan B: $325.0 million, maturing November 27, 2024.
- Revolving Credit Facility: $125.0 million, maturing November 27, 2023.
Interest Rates:
- Term Loan A and Revolver: Adjusted LIBOR + 2.25% or ABR + 1.25% (subject to reduction based on leverage ratios).
- Term Loan B: Adjusted LIBOR + 3.50% or ABR + 2.50%.
Amortization: Term Loan A requires quarterly amortization starting March 31, 2019 (1.25% initially, increasing to 2.50%). Term Loan B requires quarterly amortization totaling 1.00% per annum.
Refinancing: Proceeds were used to refinance previous facilities totaling $570.4 million ($191.4 million Term A and $379.0 million Term B).
Material Changes Versus Prior Period
The primary material change is the replacement of the April 2013 credit agreement with the new November 2018 agreement. This transaction increased the total committed credit facilities from approximately $570.4 million to $670.0 million. The new agreement extends the maturity dates of the term loans and introduces a new revolving credit facility.
Guidance, Risks, and Covenants
Covenants: The new agreement includes standard affirmative and negative covenants. Key restrictions include limitations on declaring dividends, repurchasing stock, granting liens, making acquisitions, and incurring additional indebtedness. The Term Loan A and Revolving Credit Facility require the maintenance of a maximum total secured net leverage ratio.
Collateral: The facilities are secured by substantially all assets of EVERTEC, its intermediate holding company, and EVERTEC Group, including a perfected pledge of equity interests and tangible/intangible assets.
Events of Default: Include nonpayment, breach of covenants, insolvency, bankruptcy, and change of control.
Prepayment: A 1.00% prepayment premium applies if the Term Loan B facility is refinanced or repriced within six months of the closing date.
Investor Verification Checklist
- Verify the exact amount of debt drawn versus the total committed facility size ($670.0 million).
- Review the specific "maximum total secured net leverage ratio" threshold required to maintain the Term Loan A and Revolver.
- Confirm the impact of the new interest margins (LIBOR + 2.25% to 3.50%) on future interest expense compared to the prior facility.
- Assess the restrictions on dividends and share repurchases imposed by the new negative covenants.
- Check for any immediate cash flow impact from the amortization schedule starting March 31, 2019.