Business Context and Reporting Period
This Form 8-K filing by EVERTEC, Inc. (incorporated in Puerto Rico) reports material events occurring on April 17, 2013. The filing details a significant capital structure restructuring coinciding with the company's Initial Public Offering (IPO), including the entry into new credit facilities, the termination of prior debt and consulting agreements, and amendments to corporate governance documents.
Key Financial Metrics and Debt Structure
The filing outlines the establishment of a new senior secured credit facility totaling $800.0 million, structured as follows:
- Term Loan A: $300.0 million, maturing April 17, 2018.
- Term Loan B: $400.0 million, maturing April 17, 2020.
- Revolving Credit Facility: $100.0 million, maturing April 17, 2018.
Interest Rates:
- Term Loan A and Revolver: LIBOR + 2.50% or ABR + 1.50% (subject to leverage ratio reductions).
- Term Loan B: LIBOR + 2.75% (with a 0.75% floor) or ABR + 1.75% (with a 1.75% floor).
Amortization:
- Term Loan A: 1.25% per quarter for the first 12 quarters, increasing to 1.875% and then 2.50%.
- Term Loan B: 1.00% per annum quarterly.
Refinancing Costs: The company paid termination fees of approximately $8.5 million to Apollo Management and $8.2 million to Popular, Inc., totaling approximately $16.7 million.
Material Changes Versus Prior Period
The company executed a comprehensive refinancing of its debt obligations:
- Debt Replacement: The new facilities replaced previous senior secured credit facilities consisting of a $355.0 million term loan and a $50.0 million revolving credit facility (originated September 30, 2010).
- Note Redemption: The company initiated the redemption of its outstanding 11% Senior Notes due 2018. This includes a partial redemption of $91.0 million at 111.0% of par and a full redemption of the remaining balance at 100% plus a make-whole premium.
- Consulting Agreements: Terminated consulting agreements with Apollo Management and Popular, Inc. that were in place since the 2010 credit agreement.
Guidance, Outlook, Risks, and Covenants
Covenants: The new Credit Agreement imposes standard affirmative and negative covenants, including limitations on dividends, stock repurchases, additional indebtedness, asset sales, and mergers. The Term Loan A and Revolving Credit Facility (if utilization exceeds 30%) require the maintenance of a maximum first lien secured leverage ratio.
Collateral: The facilities are secured by substantially all assets of EVERTEC, LLC and its subsidiaries, including a pledge of capital stock.
Events of Default: Include nonpayment, breach of covenants, insolvency, bankruptcy, and change of control.
Corporate Governance: The company filed an Amended and Restated Certificate of Incorporation and Bylaws effective April 17, 2013, to align with its public company status.
Investor Verification Checklist
- Verify the exact amount of the "make-whole premium" paid on the full redemption of the 11% Senior Notes, as the filing states the price was 100% plus the premium but does not quantify the premium amount.
- Confirm the total cash outflow for the refinancing, including the $16.7 million in termination fees and the specific costs associated with the note redemptions.
- Review the specific "first lien secured leverage ratio" thresholds required to reduce interest margins, as the filing mentions the mechanism but not the specific ratio targets.
- Assess the impact of the new debt covenants on the company's ability to declare dividends or pursue future acquisitions.