Business Context and Reporting Period
Paycom Software, Inc. filed a Form 8-K on February 12, 2018, reporting the entry into a material definitive agreement. The filing details a new senior secured revolving credit facility entered into on the same date.
Key Financial Metrics and Facility Terms
- Facility Size: $50,000,000 aggregate principal amount, with an option to increase to $100,000,000 subject to conditions.
- Sublimits: $5,000,000 for swingline loans and $2,500,000 for letters of credit.
- Maturity Date: February 12, 2020.
- Utilization: The facility was undrawn as of the effective date.
- Interest Rates: Prime rate plus 1.0% or adjusted LIBO rate plus 1.50%.
- Fees: 0.20% per annum commitment fee on undrawn amounts; 1.50% per annum on letters of credit; 0.125% per annum fronting fee.
- Financial Covenants: Fixed charge coverage ratio of not less than 1.25 to 1.0; funded indebtedness to EBITDA ratio of not greater than 2.0 to 1.0.
Material Changes and Usage
The filing represents a new material change in the company's capital structure through the establishment of this credit facility. Proceeds are designated for general business purposes and working capital. Letters of credit are restricted to supporting business operations. The filing does not provide comparative financial metrics (revenue, profit, cash flow) for the current period versus prior periods as this is a transactional report rather than a periodic financial statement.
Outlook, Risks, and Contingencies
- Collateral: Obligations are secured by a senior security interest in all equipment of the Loan Parties.
- Covenants: The agreement includes customary affirmative and negative covenants limiting liens, additional debt, mergers, investments, asset dispositions, and dividend payments.
- Events of Default: Include payment defaults, covenant breaches, bankruptcy, change in control, and cross-defaults. Consequences may include acceleration of obligations, cash collateral requirements, termination of commitments, and a 2.0% interest rate increase.
- Related Party Transactions: Lenders and affiliates may engage in investment banking and commercial dealings with the Company, receiving customary fees.
Investor Verification Checklist
- Verify the company's current fixed charge coverage ratio and funded indebtedness to EBITDA ratio to ensure compliance with the new covenants.
- Confirm the status of the option to increase the facility to $100,000,000 and any conditions required for such an increase.
- Review the impact of the new debt on the company's overall leverage profile and liquidity position.
- Assess the specific restrictions on dividends and capital stock distributions imposed by the negative covenants.