Business Context and Reporting Period
Company: EVERTEC, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: December 1, 2022
Event: Entry into a Material Definitive Agreement (New Credit Facilities) and Termination of Prior Credit Facilities.
Key Financial Metrics and Debt Structure
This filing details a refinancing transaction rather than operational financial results. Key debt metrics include:
- Total New Credit Facilities: $615.0 million
- Term Loan A Facility: $415.0 million
- Revolving Credit Facility: $200.0 million
- Maturity Date: December 1, 2027
- Interest Rate (Term SOFR): Adjusted Term SOFR + 1.50% (subject to step-ups to 2.50% based on leverage)
- Interest Rate (ABR): ABR + 0.50% (subject to step-ups to 1.50% based on leverage)
- Amortization: Term Loan amortizes at 5% per annum initially, increasing to 7.5% for the 2027 calendar year.
- Use of Proceeds: Refinancing existing credit facilities, payment of fees/expenses, and general corporate purposes.
Material Changes Versus Prior Period
Termination of Prior Agreement: On December 1, 2022, EVERTEC Group terminated its previous secured credit facilities dated November 27, 2018, which were administered by Bank of America, N.A.
Refinancing: The new facilities replace the 2018 agreement, extending the maturity date to 2027 and establishing new interest rate margins and covenants.
Covenants, Risks, and Management Commentary
Financial Covenants: The agreement requires EVERTEC Group to maintain a maximum total net leverage ratio of:
- 4.50 to 1.00 from March 31, 2023, to September 30, 2024.
- 4.00 to 1.00 thereafter.
Restrictive Covenants: The agreement includes limitations on declaring dividends, repurchasing stock, granting liens, making acquisitions, incurring additional indebtedness, and selling assets.
Collateral and Guarantees: The facilities are secured by substantially all assets of EVERTEC and its material subsidiaries. EVERTEC and its subsidiaries guarantee repayment.
Events of Default: Include nonpayment, breach of covenants, insolvency, bankruptcy, change of control, and cross-defaults on material indebtedness.
Management Commentary: The filing references a press release issued on December 2, 2022, regarding the transaction but does not contain additional narrative commentary within the text of this 8-K.
Investor Verification Checklist
- Verify the exact amount drawn from the Revolving Facility on the Closing Date versus the total $200.0 million commitment.
- Confirm the current Total Net Leverage Ratio to ensure compliance with the 4.50 to 1.00 covenant threshold effective March 31, 2023.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific definitions of "Total Net Leverage Ratio" and permitted exceptions to covenants.
- Assess the impact of the interest rate step-ups on future debt service costs if leverage ratios increase.
- Check for any subsequent filings regarding the utilization of the Revolving Facility for general corporate purposes.