Business Context and Reporting Period
This Form 8-K filing by Main Street Capital Corporation (Main Street) reports on events occurring on June 5, 2018. The primary event is the entry into a Third Amended and Restated Credit Agreement to restructure the company's revolving credit facility.
Key Financial Metrics and Debt Structure
The filing details the terms of the new Credit Facility rather than reporting period-specific revenue or profit metrics.
- Revolving Commitments: Increased to a maximum of $655,000,000, subject to a borrowing base.
- Expansion Option: Main Street retains the right to request an increase in commitments up to $800,000,000, subject to conditions.
- Maturity Date: Extended to September 27, 2023.
- Extension Options: Two one-year extension options are available, potentially extending maturity by up to two additional years.
- Interest Rates:
- LIBOR + 1.875% (or Base Rate + 0.875%) if excess collateral and leverage requirements are met.
- LIBOR + 2.0% (or Base Rate + 1.0%) if requirements are not met.
- Unused Commitment Fee: 0.25% per annum on average daily unused commitments.
Material Changes Versus Prior Period
The Amended Credit Agreement replaces the Second Amended and Restated Credit Agreement originally entered into on September 27, 2013. Material changes include:
- Significant increase in the revolving credit limit compared to the prior facility.
- Extension of the facility term by approximately five years from the original 2013 agreement.
- Adjustment of interest rate spreads and the introduction of specific tiered pricing based on collateral and leverage metrics.
- Expansion of the lender group to include multiple new institutions alongside existing lenders.
Guidance, Risks, and Covenants
The filing outlines specific financial covenants and risks associated with the new debt structure:
- Covenants: The agreement requires maintaining a minimum availability of 10% of the borrowing base, minimum consolidated tangible net worth, minimum interest coverage ratio, and minimum asset coverage ratio.
- Collateral: The facility is secured by substantially all present and future assets of Main Street and its guarantors, 100% of equity in domestic subsidiaries, and 65% of voting equity (100% non-voting) in foreign subsidiaries.
- Cross Default: The agreement contains cross-default provisions linked to other material debt of Main Street and its subsidiaries.
- Other Events: A press release was issued on June 6, 2018, regarding these transactions.
Investor Verification Checklist
- Verify the current borrowing base calculation to determine the actual available liquidity under the $655 million limit.
- Confirm Main Street's current compliance with the new minimum availability, tangible net worth, and leverage covenants.
- Review the full text of the Third Amended and Restated Credit Agreement (Exhibit 10.1) for detailed definitions of "eligible investments" and leverage requirements.
- Assess the impact of the increased unused commitment fee (0.25%) on future cash flow if the facility remains underutilized.
- Monitor the status of the two one-year extension options and the conditions required for lender approval.