Upland Software, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated August 5, 2019, reports on events occurring on August 5 and August 6, 2019. Upland Software, Inc. (UPLD), an emerging growth company incorporated in Delaware, entered into a new Credit Agreement to refinance its existing debt facilities and fund future corporate needs, including acquisitions.
Key Financial Metrics and Debt Structure
The filing details the establishment of new secured credit facilities totaling $410,000,000:
- Term Loan: $350,000,000 aggregate principal amount. The entire amount was drawn at closing.
- Revolving Credit Facility (Revolver): Up to $60,000,000 aggregate principal amount. No amounts were drawn at closing.
- Letters of Credit: Subfacility up to $10,000,000 reserved against the Revolver.
- Interest Rate: The Term Loan accrues interest at Base Rate + 2.75% or LIBOR + 3.75%. The Company entered into interest rate swap agreements to fix the effective interest rate at 5.384% for the seven-year term.
- Maturity Dates: Term Loan matures on August 6, 2026; Revolver matures on August 6, 2024.
- Repayment Terms: Term Loan requires quarterly repayments of 0.25% of the principal beginning December 31, 2019.
Material Changes Versus Prior Period
The Company terminated its existing Wells Fargo Credit Agreement dated May 14, 2015, and repaid all liabilities thereunder in full on August 5, 2019. The new Credit Agreement replaces and refinances this prior facility, increasing the total available credit capacity and extending the maturity of the term debt.
Guidance, Covenants, and Risks
Use of Proceeds: Proceeds from the Term Loan were used to repay the prior Wells Fargo Credit Agreement, fund transaction fees, and finance general corporate needs and future acquisitions.
Covenants: The agreement includes customary affirmative and negative covenants limiting additional indebtedness, liens, investments, mergers, asset dispositions, and dividends. A financial covenant requires a Total Leverage Ratio not greater than 6.00 to 1.00, which is only effective if Revolver utilization exceeds 35% of commitments.
Expansion Options: The Company may increase the Term Loan by up to the greater of $83,000,000 or 100% of adjusted EBITDA, subject to conditions.
Risks: The agreement contains events of default including non-payment, covenant breaches, and change of control. Default could result in acceleration of debt and exercise of remedies against collateral, which includes substantially all assets of the Loan Parties.
Key Facts for Investor Verification
- Verify the impact of the new 5.384% fixed interest rate on future interest expense compared to the prior facility.
- Confirm the Company's current leverage ratio against the 6.00 to 1.00 covenant threshold.
- Monitor the utilization of the $60,000,000 Revolver, as high utilization triggers the financial covenant.
- Review the specific terms of the interest rate swap agreements filed as exhibits to understand hedge effectiveness.
- Assess the Company's acquisition strategy given the explicit intent to use proceeds for future acquisitions.