Business Context and Reporting Period
Company: Virtu Financial, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: March 1, 2019
Event: Completion of the acquisition of Investment Technology Group, Inc. ("ITG") and entry into a new Credit Agreement.
Key Financial Metrics and Debt Structure
This filing details a significant refinancing and acquisition financing event rather than standard operating results. Key financial terms include:
- Acquisition Consideration: ITG shareholders received $30.30 per share in cash.
- New Term Loan: $1.5 billion senior secured first lien term loan drawn in full on the Closing Date.
- $404.5 million used to repay existing term loan facilities.
- $1,095 million used to finance acquisition consideration and fees.
- Revolving Facility: $50.0 million senior secured first lien revolving facility (includes $5.0 million letter of credit and $5.0 million swingline subfacilities).
- Interest Rates:
- Base Rate: Prime, Federal Funds + 0.5%, or Adjusted LIBOR + 1.0% (plus 1.00% floor), plus a margin of 2.50% (stepdown to 2.25% based on leverage).
- Adjusted LIBOR: Adjusted LIBOR (plus 0% floor), plus a margin of 3.50% (stepdown to 3.25% based on leverage).
- Commitment Fee: 0.50% per annum on unused revolving amounts (stepdowns to 0.375% and 0.25%).
- Amortization: Term loans amortize at 1.0% of the original aggregate principal amount annually.
Material Changes Versus Prior Period
- Termination of Prior Debt: The Fourth Amended and Restated Credit Agreement (dated June 30, 2017) was terminated on the Closing Date.
- Capital Structure Change: The company assumed obligations of the Acquisition Borrower, consolidating debt under the new Credit Agreement.
- Acquisition Completion: ITG shares were cancelled and converted to cash, finalizing the merger announced in November 2018.
Outlook, Risks, and Contingencies
Maturity Dates and Springing Provisions:
- Term Loans: Mature on the seventh anniversary of the Closing Date (March 2026). However, a "term springing maturity date" applies if at least $400.0 million of the existing 6.750% second lien notes due 2022 are not repaid or refinanced 91 days prior to the notes' maturity.
- Revolving Facility: Terminates on the third anniversary of the Closing Date (March 2022). A "revolving springing maturity date" applies if the repayment requirement for the second lien notes is not met 182 days prior to the notes' maturity.
Covenants and Obligations:
- Leverage Ratio: The revolving facility is subject to a springing net first lien leverage ratio based on usage. Interest margins and commitment fees step down based on the first lien leverage ratio.
- Contingent Payments: Borrower is subject to contingent principal payments based on excess cash flow and other triggering events.
- Collateral: Borrowings are secured by substantially all assets of the Borrower and guarantors (Virtu Financial and material non-regulated restricted subsidiaries).
Financial Results: The filing text does not provide revenue, profit, cash flow, or margin data for the reporting period.
Investor Verification Checklist
- Verify the status of the $400.0 million repayment requirement for the 6.750% second lien notes due 2022 to determine if springing maturity dates will be triggered.
- Review the full text of the Credit Agreement (to be filed in the next Form 10-Q) for detailed covenant definitions and exceptions.
- Assess the impact of the $1.5 billion term loan and $50 million revolver on the company's overall leverage ratio and interest coverage.
- Confirm the integration progress of ITG and the realization of synergies mentioned in the November 2018 Merger Agreement.