CDW Corp Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by CDW Corporation on December 20, 2010, reporting events occurring on December 17, 2010. The filing details the entry into a material definitive agreement regarding the issuance of senior secured notes by CDW LLC and CDW Finance Corporation, wholly-owned subsidiaries of the Company.
Key Financial Metrics and Transaction Details
- Debt Issuance: $500 million aggregate principal amount of 8% Senior Secured Notes due 2018.
- Interest Rate: 8% per annum, payable semi-annually starting June 15, 2011.
- Maturity Date: December 15, 2018.
- Use of Proceeds: 100% of proceeds were used to repay indebtedness outstanding under the Company's senior secured term loan at par.
- Security: The Notes are secured by a guarantee and collateral agreement.
Material Changes and Covenants
The issuance represents a refinancing of existing term loan debt. The Indenture imposes significant covenants restricting the Company's ability to incur additional indebtedness, issue preferred stock, pay dividends, create liens, make certain investments, or merge with other companies. These restrictions are subject to specific limitations and exceptions outlined in the Indenture.
Outlook, Risks, and Unusual Items
- Redemption Rights: The Issuers may redeem the Notes prior to December 15, 2014, at 100% of principal plus a "make-whole" premium. After this date, redemption is possible at 100% plus a declining premium. Up to 35% of the principal may be redeemed prior to December 15, 2013, using proceeds from equity offerings.
- Change of Control: Holders may require repurchase at 101% of principal plus accrued interest if certain change of control events occur.
- Registration Rights Risk: The Issuers must file an exchange offer registration statement within 300 days of issuance. Failure to meet these obligations triggers an interest rate penalty of 0.25% per annum, increasing by an additional 0.25% for each subsequent 90-day default period, up to a maximum of 0.50%.
- Events of Default: Includes failure to pay principal or interest, covenant violations, and bankruptcy. In bankruptcy events, all Notes become immediately due. For other defaults, holders of at least 25% of the principal may declare the Notes due.
Investor Verification Checklist
- Verify the specific terms of the "make-whole" premium calculation in the Indenture (Exhibit 4.1).
- Confirm the status of the exchange offer registration statement filing deadline (300 days from December 17, 2010).
- Review the amended and restated Collateral Agreement (Exhibit 10.1) to understand the specific assets pledged as security.
- Assess the impact of the new covenants on future dividend payments and capital allocation strategies.
- Monitor the Company's compliance with the 25% holder threshold for declaring events of default.