Business Context and Reporting Period
This Form 8-K, filed on October 30, 2020, by SYNNEX Corporation (now TD SYNNEX Corp), reports the entry into a material definitive agreement by its wholly-owned subsidiary, Concentrix Corporation. The filing supports the ongoing plan to separate Concentrix, a technology-infused customer experience solutions business, into an independent publicly-traded company.
Key Financial Metrics and Agreements
The primary financial instrument disclosed is a new accounts receivable securitization facility established for Concentrix.
- Facility Size: $350.0 million.
- Structure: Concentrix subsidiaries (Originators) transfer accounts receivable to a bankruptcy-remote special purpose entity (Borrower), which grants a security interest to lenders in exchange for borrowings.
- Interest Rates: Commercial paper rate plus 1.05% per annum, or LIBOR plus 1.15% per annum.
- Undrawn Fees: Monthly fees ranging from 30.0 to 37.5 basis points on the undrawn portion.
- Term: Initial term of two years.
- Liquidity Impact: Provides liquidity to Concentrix in connection with the separation; no specific impact on SYNNEX's consolidated cash flow or debt is quantified in this filing.
Material Changes and Conditions
The filing details a new financing arrangement rather than a change in historical performance metrics. Key conditions include:
- Funding Condition: The initial funding date must occur prior to February 28, 2021, contingent upon the completion of the Concentrix separation.
- Availability Limits: Borrowing availability may be restricted by changes in client credit ratings, client concentration levels, and the performance characteristics of the transferred receivables.
- Covenants: Includes a consolidated leverage ratio covenant consistent with Concentrix's new revolving and term loan credit facility.
Outlook, Risks, and Management Commentary
Management indicates that immediately following the separation, SYNNEX stockholders are expected to own shares of both SYNNEX and Concentrix at the same percentage ownership held prior to the transaction. The filing includes significant forward-looking statements regarding the separation timeline and the execution of the securitization.
Risks and Contingencies:
- The separation may not be completed timely or at all.
- SYNNEX's business performance may be negatively impacted by separation-related uncertainty.
- External factors, including the impact of COVID-19 and related governmental responses, pose risks to operations and funding conditions.
- Conditions to funding the Securitization Facility may not be met.
Investor Verification Checklist
- Verify the status of the Concentrix separation plan and whether the February 28, 2021, funding deadline is met.
- Review the attached Receivables Financing Agreement (Exhibit 10.1) and Receivables Purchase Agreement (Exhibit 10.2) for specific default triggers and covenants.
- Monitor the Investor Presentation (Exhibit 99.1) for updated guidance on the separation timeline and financial projections.
- Assess the impact of the securitization on Concentrix's standalone liquidity versus SYNNEX's consolidated balance sheet post-separation.