Business Context and Reporting Period
This Form 8-K Current Report was filed by Accel Entertainment, Inc. on July 14, 2020. The filing primarily addresses the commencement of a tender offer for outstanding warrants and an application for a waiver of debt covenant breaches related to the Company's credit agreement.
Key Financial Metrics and Capital Structure
The filing does not provide specific revenue, profit, cash flow, or margin figures for the current period. However, it references the following financial instruments and obligations:
- Securities: Class A-1 common stock (ACEL) and Warrants (ACEL-WS) are registered on the New York Stock Exchange.
- Debt Obligations: The Company is subject to a Credit Agreement dated November 13, 2019, which includes covenants for the First Lien Net Leverage Ratio and Fixed Charge Coverage Ratio.
- Liquidity Outlook: Management expects to meet cash obligations for the next 12 months based on current assumptions regarding the impact of COVID-19.
Material Changes and Corporate Actions
The filing details two significant material events:
- Commencement of Tender Offer: On July 14, 2020, the Company initiated an offer to exchange outstanding warrants (including Pace Public Warrants, Pace Private Placement Warrants, Business Combination Private Placement Warrants, and Accel Public Warrants) for 0.250 shares of Class A-1 common stock per warrant. The offer is open until August 11, 2020.
- Warrant Redemption: The Company previously notified holders that it will redeem 100% of the Pace Public Warrants on July 16, 2020. Consequently, these warrants are expected to be redeemed before the tender offer expires, potentially leading to the delisting of remaining warrants from the NYSE.
- Debt Covenant Waiver Application: Due to uncertainties surrounding COVID-19's impact on the gaming industry, the Company has applied for a waiver of potential covenant breaches for the First Lien Net Leverage Ratio and Fixed Charge Coverage Ratio covering the period from September 30, 2020, to March 31, 2021.
Guidance, Risks, and Contingencies
Management Commentary and Outlook: Management believes the Company will remain in compliance with its credit agreement covenants under current assumptions but sought a waiver to provide additional financial flexibility given the inherent uncertainties of future industry restrictions.
Risks and Contingencies:
- COVID-19 Impact: Future restrictions on the gaming industry could materially differ from current assumptions, affecting financial performance and covenant compliance.
- Delisting Risk: Following the redemption of Pace Public Warrants, the remaining Accel Warrants may no longer meet NYSE continued listing standards.
- Forward-Looking Statements: The filing contains forward-looking statements subject to risks detailed in the Company's Form S-4 Registration Statement.
Investor Verification Checklist
- Verify the terms of the Tender Offer in the Schedule TO and Prospectus/Offer to Exchange filed with the SEC.
- Confirm the status of the waiver application for the First Lien Net Leverage Ratio and Fixed Charge Coverage Ratio.
- Review the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2019 (Exhibit 99.2).
- Monitor the effectiveness of the Form S-4 registration statement, as securities cannot be sold until it becomes effective.
- Assess the potential impact of warrant delisting on the liquidity and trading of ACEL-WS.