Business Context and Reporting Period
Company: National Vision Holdings, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 3, 2021
Event Date: June 2, 2021
Context: The Company entered into Amendment No. 2 to its Amended and Restated Credit Agreement with Bank of America, N.A., and other lenders. This amendment modifies interest rates, financial covenants, and loan structures.
Key Financial Metrics and Debt Structure
Debt Balance: Following a prepayment of outstanding term loans, the aggregate amount of senior secured first lien term loans (Term A Loans) outstanding is $200,000,000.
Amortization: No amortization payments are due; the full balance is payable upon the Term Loan A Maturity Date.
Interest Rate Margins (Initial):
- LIBOR Loans: 1.25%
- ABR Loans: 0.25%
Material Changes Versus Prior Period
The filing details significant modifications to the Existing Credit Agreement dated July 18, 2019:
- Debt Reduction: Prepayment of term loans to reduce the outstanding balance to $200 million.
- Covenant Adjustments: Modification of maximum leverage and minimum interest coverage ratios.
- Interest Rate Mechanics: Implementation of a new pricing schedule based on the Consolidated Total Debt to Consolidated EBITDA Ratio and removal of the 1.00% LIBOR floor.
- LIBOR Replacement: Addition of customary LIBOR replacement provisions.
Guidance, Outlook, and Covenants
Financial Covenants:
- Maximum Leverage Ratio (Debt/EBITDA):
- 4.50:1.00 for the last day of the second and third fiscal quarters of 2021.
- 4.25:1.00 from and after the last day of the fourth fiscal quarter of 2021.
- Minimum Interest Coverage Ratio: Must not be less than 3.00:1.00 as of the last day of any fiscal quarter.
| Debt/EBITDA Ratio | LIBOR Loans Margin | ABR Loans Margin |
|---|---|---|
| > 2.50:1.00 | 2.00% | 1.00% |
| < 2.50:1.00 but > 1.75:1.00 | 1.75% | 0.75% |
| < 1.75:1.00 but > 1.00:1.00 | 1.50% | 0.50% |
| < 1.00:1.00 | 1.25% | 0.25% |
Investor Verification Checklist
- Verify the exact date of the Term Loan A Maturity to assess liquidity requirements.
- Confirm the Company's current Consolidated Total Debt to Consolidated EBITDA Ratio to determine the applicable interest margin tier.
- Review the full text of Exhibit 10.1 for specific definitions of "Material Acquisition" and associated covenant step-ups.
- Monitor the Company's ability to maintain the 3.00:1.00 minimum Interest Coverage Ratio in upcoming fiscal quarters.