BARRETT BUSINESS SERVICES, INC. (NASDAQ:BBSI) Files An 8-K Entry into a Material Definitive AgreementItem 1.01. Entry into a Material Definitive Agreement.
The disclosure included under Item 2.03 is incorporated by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On June 22, 2018, Barrett Business Services, Inc. (the “Company”), finalized a revised credit facility with its principal bank, Wells Fargo Bank, National Association (the “Lender”), in conjunction with restructuring its workers’ compensation insurance coverage to achieve certain cost reductions. Under the amended credit arrangements, the Lender has agreed that it or one of its affiliates will issue a standby letter of credit in the maximum principal amount of $63.7million (the “Letter of Credit”) for the account of the Company and the benefit of ACE American Insurance (“ACE Insurance”). When issued, the Letter of Credit will have an expiration date of July 1, 2019, subject to automatic renewal in specified circumstances. The terms of the revised credit arrangements are set forth in the Second Amendment (the “Second Amendment”) dated June 20, 2018, to the Amended and Restated Credit Agreement dated as of June 30, 2017 (the “Credit Agreement”), and related documents executed by the Company and the Lender.
Under the Second Amendment, the Lender has been granted a security interest of first priority in certain blocked securities accounts (collectively, the “Collateral Accounts”). The Company has agreed to deposit in the Collateral Accounts 50% of the Company’s consolidated net income (after tax and less cash dividends) for each quarter plus, to the extent necessary, an additional amount by May 31 each year so that the deposits in the Collateral Accounts for the prior year total at least $16 million. The Lender has also been granted a security interest in accounts receivable and other rights to payment, other accounts, general intangibles, inventory and equipment.
The initial fee payable to the Lender under the Letter of Credit is equal to 2.5% of the face amount thereof. Upon annual renewal of the Letter of Credit, the fees payable to the Lender will equal 1.25% of the amounts deposited in the Collateral Accounts plus 2.5% of the outstanding balance of the face amount of the Letter of Credit in excess of such deposits. The fees will be calculated on an annual basis, payable quarterly in advance.
The Second Amendment further provides that:
|·||The Company’s EBITDA (defined as net profit before taxes plus interest expense (net of capitalized interest expense), depreciation expense, and amortization expense) on a rolling four-quarter basis must be not less than $30 million at the end of each fiscal quarter.|
|·||The Company may not pay dividends during a fiscal quarter that in the aggregate exceed $0.25 per share (subject to increase by up to 10% each year beginning June 30, 2019).|
The Second Amendment also provides for additional events of default tied to the potential incurrence of specified liabilities or cross-defaults under the Company’s workers’ compensation insurance arrangements.
Except as expressly modified by the Second Amendment, the terms and conditions of the Credit Agreement are unchanged. Such terms and conditions are described in Note 4 to the Company’s unaudited interim condensed consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed by the Company with the Securities and Exchange Commission on May 8, 2018, and incorporated herein by reference.
The foregoing description of the Second Amendment is qualified in its entirety by reference tothe full text of the Second Amendment, a copy of which is filed as Exhibit4.1 to this report and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
BARRETT BUSINESS SERVICES INC ExhibitEX-4.1 2 tv497329_ex4-1.htm EXHIBIT 4.1 Exhibit 4.1 SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of June 20,…To view the full exhibit click
About BARRETT BUSINESS SERVICES, INC. (NASDAQ:BBSI)
Barrett Business Services, Inc. (BBSI) is a provider of business management solutions for small and mid-sized companies. The Company has developed a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry. BBSI’s core purpose is to advocate for business owners, particularly in the small and mid-sized business segment. The Company offers two categories of services: Professional Employer Services (PEO) and Staffing. It enters into a client services agreement with its PEO clients to establish a co-employment relationship with each client company. Its staffing services include on-demand or short-term staffing assignments, contract staffing, long-term or indefinite-term on-site management and direct placement. It operates through a network of branch offices throughout California, Oregon, Washington, Arizona, Colorado, Idaho, Nevada, Utah, Delaware, Maryland, North Carolina and Virginia.