Business Context and Reporting Period
This Form 8-K, filed on April 22, 2016, by Global Payments Inc. (the "Company"), reports the completion of a merger with Heartland Payment Systems, Inc. ("Heartland"). The transaction was executed via a two-step merger pursuant to an agreement dated December 15, 2015.
Key Financial Metrics and Transaction Details
Merger Consideration: Each outstanding share of Heartland common stock was converted into the right to receive $53.28 in cash and 0.6687 of a share of Global Payments common stock. Outstanding options and restricted stock units were converted or vested based on this consideration.
Financing Structure: The cash portion of the consideration was funded through borrowings under an amended credit facility and available cash on hand. The Company entered into a "Heartland Incremental Term B Loan Lender Joinder Agreement" to secure a $1.045 billion term loan B facility.
Debt Facilities: The amended credit facility now includes:
- $1.75 billion term loan facility
- $1.25 billion revolving credit facility
- $735 million delayed draw term loan facility
- $1.045 billion Heartland Incremental Term Loan B facility
Repayment Terms: The Heartland Incremental Term Loan B Facility requires quarterly repayments of $2,612,500 commencing September 30, 2016, with the remaining balance due in April 2023.
Interest Rates: Prior to the first compliance certificate (due by August 29, 2016), the rate is LIBOR + 3.50% or Base Rate + 2.50%. Upon delivery of the certificate and maintaining a Leverage Ratio of no greater than 3.25:1.00, the rate reduces to LIBOR + 3.25% or Base Rate + 2.25%.
Liquidity and Margins: The filing text does not provide specific values for revenue, profit, cash flow, or operating margins for the reporting period.
Material Changes Versus Prior Period
The primary material change is the acquisition of Heartland Payment Systems, Inc., significantly altering the Company's asset base and capital structure. The Company's debt load increased to fund the transaction, specifically through the new $1.045 billion term loan facility. Additionally, the Board of Directors expanded from eight to ten members, appointing two former Heartland executives.
Guidance, Outlook, and Risks
Management Commentary: The Company issued a press release on April 25, 2016, announcing the completion of the merger. No specific forward-looking financial guidance is included in this filing.
Risks and Contingencies: The credit facility contains customary affirmative and restrictive covenants, including financial covenants based on the Leverage Ratio and the ratio of EBITR to Fixed Charges. An event of default could allow lenders to declare all obligations immediately due and payable. The obligations are secured by substantially all domestic assets of the Company and certain subsidiaries.
Unusual Items: The filing notes that financial statements of the acquired business and pro forma financial information will be filed in an amendment to this report by July 8, 2016.
Investor Verification Checklist
- Verify the final pro forma financial information and combined revenue/profit metrics once filed by July 8, 2016.
- Confirm the Company's ability to meet the Leverage Ratio covenant (3.25:1.00) to secure reduced interest rates on the new debt.
- Review the specific terms of the "Heartland Incremental Term B Loan Lender Joinder Agreement" (Exhibit 10.1) for additional covenants.
- Monitor the integration progress of Heartland's operations and the impact on the Company's overall cost structure.
- Check for any subsequent filings regarding the appraisal rights exercised by Heartland stockholders.