Business Context and Reporting Period
This Form 8-K was filed by Greatbatch, Inc. on September 23, 2013, reporting events occurring on September 20, 2013. The filing details the entry into a new material definitive agreement regarding the company's credit facilities.
Key Financial Metrics and Debt Structure
The filing outlines a new credit facility structure replacing a previous $400 million agreement. Key terms include:
- Total Facility Size: $500 million ($300 million revolving credit facility and $200 million term loan facility).
- Revolving Credit Facility: $300 million, including a $15 million letter of credit subfacility and a $15 million swingline subfacility. Maturity is September 20, 2018, with a one-year extension option.
- Term Loan Facility: $200 million, fully drawn on September 20, 2013. Maturity is September 20, 2019.
- Amortization Schedule: 5% annual reduction in years 1-2, 7.5% in year 3, and 10% in years 4-6.
- Interest Rates: Variable rates based on Base Rate or LIBOR plus an applicable margin ranging from 0.000% to 2.750% depending on the total leverage ratio.
- Commitment Fees: 0.175% to 0.250% per annum on the unused portion of the revolving loan commitments.
Material Changes Versus Prior Period
The 2013 Credit Agreement replaces the amended and restated credit agreement dated June 24, 2011, which provided for a $400 million facility. The new agreement increases the total available credit to $500 million and introduces specific amortization requirements for the term loan that were not detailed in the prior agreement summary.
Guidance, Covenants, and Restrictions
The agreement includes significant financial covenants and spending limits:
- Financial Covenants:
- Minimum Interest Coverage Ratio (Adjusted EBITDA to Interest Expense): 3.00 to 1.00.
- Maximum Total Leverage Ratio: 4.50 to 1.00 through January 1, 2016; 4.25 to 1.00 thereafter.
- Permitted Activities (Aggregate Limits):
- Acquisitions: Up to $250 million.
- Other Investments: Up to $100 million.
- Foreign Subsidiary Investments: Up to $20 million.
- Stock Repurchases and Dividends: Up to $150 million.
- Reset Option: If the total leverage ratio is less than 2.75 to 1.0 for two consecutive fiscal quarters, the company may reset the permitted activity limits to the full amount available at closing.
- Collateral: Secured by a security interest in substantially all non-real estate assets of Greatbatch, the Borrower, and certain U.S. subsidiaries.
Investor Verification Checklist
- Verify the current total leverage ratio to ensure compliance with the 4.50 to 1.00 (or 4.25 to 1.00) covenant threshold.
- Confirm the Adjusted EBITDA to Interest Expense ratio meets the minimum 3.00 to 1.00 requirement.
- Review the amortization schedule to assess the impact of mandatory principal payments on future cash flow.
- Monitor the company's utilization of the $150 million limit for stock repurchases and dividends.
- Check for any events of default that could trigger immediate repayment of the $200 million term loan and revolving balances.