MSC Industrial Direct Co., Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by MSC Industrial Direct Co., Inc. on June 10, 2011, reporting events occurring on June 8, 2011. 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 does not provide specific revenue, profit, cash flow, or margin figures for the period. The primary financial disclosure concerns the company's debt structure:
- New Credit Facility: A new $200 million revolving credit facility was established.
- Maturity: The facility matures on June 8, 2016.
- Incremental Capacity: The company may add incremental term loans or increase revolving commitments by up to $250 million.
- Interest Rates: Borrowings bear interest at LIBOR plus 1.00% to 1.25% or Prime/Federal Funds plus applicable margins (0% to 0.25%), based on the consolidated leverage ratio.
- Fees: Undrawn fees range from 0.15% to 0.20% per annum; letter of credit usage fees range from 1.00% to 1.25%.
Material Changes Versus Prior Period
The new facility replaces the company's existing revolving credit facility, which matured and was terminated on June 8, 2011. The new agreement extends the maturity date by five years and introduces specific financial covenants not explicitly detailed in the summary of the prior facility.
Covenants, Risks, and Management Commentary
The new credit agreement includes standard restrictions on incurring additional debt, making investments, engaging in fundamental corporate changes, incurring liens, disposing of assets, and entering into affiliate transactions. Key financial covenants require the company to maintain:
- Maximum Leverage Ratio: Total indebtedness to EBITDA of no more than 3.00 to 1.00.
- Minimum Interest Coverage Ratio: EBITDA to total interest expense of at least 3.00 to 1.00.
The facility is unsecured but guaranteed by certain subsidiaries. The filing notes that lenders and their affiliates may perform commercial and investment banking services for the company.
Key Facts for Investor Verification
- Verify the company's current consolidated leverage ratio to ensure compliance with the 3.00:1.00 covenant.
- Confirm the total amount of indebtedness outstanding immediately following the termination of the old facility and the drawdown on the new one.
- Review the full Credit Agreement (Exhibit 10.01) for specific definitions of "Total Indebtedness" and "EBITDA" used in the covenants.
- Monitor the company's ability to maintain the minimum 3.00:1.00 interest coverage ratio given current interest rate environments.