LINCOLN EDUCATIONAL SERVICES CORPORATION (NASDAQ:LINC) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
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Entry into a Material Definitive Agreement.
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On March 31, 2017, Lincoln Educational Services Corporation (the
Company) and its wholly-owned subsidiaries (collectively with the
Company, the Borrowers) entered into a secured revolving credit
agreement (the Credit Agreement) with Sterling National Bank (the
Bank) to which the Borrowers obtained a credit facility in the
aggregate principal amount of up to $55 million (the Credit
Facility). The Credit Facility replaces a term loan facility (the
Prior Credit Facility) from a lender group led by HPF Service,
LLC, which was repaid and terminated concurrently with the
effectiveness of the Credit Facility. The term of the Credit
Facility is 38 months, maturing on May 31, 2020.
Company) and its wholly-owned subsidiaries (collectively with the
Company, the Borrowers) entered into a secured revolving credit
agreement (the Credit Agreement) with Sterling National Bank (the
Bank) to which the Borrowers obtained a credit facility in the
aggregate principal amount of up to $55 million (the Credit
Facility). The Credit Facility replaces a term loan facility (the
Prior Credit Facility) from a lender group led by HPF Service,
LLC, which was repaid and terminated concurrently with the
effectiveness of the Credit Facility. The term of the Credit
Facility is 38 months, maturing on May 31, 2020.
The Credit Facility is secured by a first priority lien in favor
of the Bank on substantially all of the personal property owned
by the Borrowers as well as mortgages on four parcels of real
property owned by the Borrowers in Connecticut, Colorado,
Tennessee and Texas at which four of the Borrowers schools are
located. The Credit Facility consists of (a) a $30 million loan
facility (Facility 1), which is comprised of a $25 million
revolving loan designated as Tranche A and a $5 million
non-revolving loan designated as Tranche B and (b) a $25 million
revolving loan facility (Facility 2), which includes a sublimit
amount for letters of credit of $10 million.
of the Bank on substantially all of the personal property owned
by the Borrowers as well as mortgages on four parcels of real
property owned by the Borrowers in Connecticut, Colorado,
Tennessee and Texas at which four of the Borrowers schools are
located. The Credit Facility consists of (a) a $30 million loan
facility (Facility 1), which is comprised of a $25 million
revolving loan designated as Tranche A and a $5 million
non-revolving loan designated as Tranche B and (b) a $25 million
revolving loan facility (Facility 2), which includes a sublimit
amount for letters of credit of $10 million.
At the closing, the Borrowers drew $25 million under Tranche A of
Facility 1, which, to the terms of the Credit Agreement, was used
to repay the Prior Credit Facility and to pay transaction costs
associated with closing the Credit Facility. After the
disbursements of such amounts, the Company retained approximately
$1.832 million of the borrowed amount for working capital
purposes.
Facility 1, which, to the terms of the Credit Agreement, was used
to repay the Prior Credit Facility and to pay transaction costs
associated with closing the Credit Facility. After the
disbursements of such amounts, the Company retained approximately
$1.832 million of the borrowed amount for working capital
purposes.
Also, at closing, $5 million was drawn under Tranche B and, to
the terms of the Credit Agreement, was deposited into an
interest-bearing pledged account (the Pledged Account) in the
name of the Company maintained at the Bank in order to secure
payment obligations of the Borrowers with respect to the
potential costs of remediation of any environmental contamination
discovered at certain of the mortgaged properties upon completion
of environmental studies undertaken at such properties. to the
terms of the Credit Agreement, funds will be released from the
Pledged Account upon request by the Company to reimburse the
Borrowers for costs incurred for environmental remediation, if
required. Upon the completion of any such environmental
remediation or upon determination that no environmental
remediation is necessary, funds remaining in the Pledged Account
will be released from the Pledged Account and applied to the
outstanding principal balance of Tranche B and availability under
Tranche B will be permanently reduced to zero and, accordingly,
the maximum principal amount of Facility 1 will be permanently
reduced to $25 million.
the terms of the Credit Agreement, was deposited into an
interest-bearing pledged account (the Pledged Account) in the
name of the Company maintained at the Bank in order to secure
payment obligations of the Borrowers with respect to the
potential costs of remediation of any environmental contamination
discovered at certain of the mortgaged properties upon completion
of environmental studies undertaken at such properties. to the
terms of the Credit Agreement, funds will be released from the
Pledged Account upon request by the Company to reimburse the
Borrowers for costs incurred for environmental remediation, if
required. Upon the completion of any such environmental
remediation or upon determination that no environmental
remediation is necessary, funds remaining in the Pledged Account
will be released from the Pledged Account and applied to the
outstanding principal balance of Tranche B and availability under
Tranche B will be permanently reduced to zero and, accordingly,
the maximum principal amount of Facility 1 will be permanently
reduced to $25 million.
to the terms of the Credit Agreement, all draws under Facility 2
for letters of credit or revolving loans must be secured by cash
collateral in an amount equal to 100% of the aggregate stated
amount of the letters of credit issued and revolving loans
outstanding through draws from Facility 1 or other available cash
of the Company.
for letters of credit or revolving loans must be secured by cash
collateral in an amount equal to 100% of the aggregate stated
amount of the letters of credit issued and revolving loans
outstanding through draws from Facility 1 or other available cash
of the Company.
Accrued interest on each revolving loan will be payable monthly
in arrears. Revolving loans under Tranche A of Facility 1 will
bear interest at a rate per annum equal to the greater of (x) the
Banks prime rate plus 2.50% and (y) 6.00%. The amount borrowed
under Tranche B of Facility 1 and revolving loans under Facility
2 will bear interest at a rate per annum equal to the greater of
(x) the Banks prime rate and (y) 3.50%.
in arrears. Revolving loans under Tranche A of Facility 1 will
bear interest at a rate per annum equal to the greater of (x) the
Banks prime rate plus 2.50% and (y) 6.00%. The amount borrowed
under Tranche B of Facility 1 and revolving loans under Facility
2 will bear interest at a rate per annum equal to the greater of
(x) the Banks prime rate and (y) 3.50%.
Each issuance of a letter of credit under Facility 2 will require
the payment of a letter of credit fee to the Bank equal to a rate
per annum of 1.75% on the daily amount available to be drawn
under the letter of credit, which fee shall be payable in
quarterly installments in arrears. Letters of credit totaling
$6,186,906 that were outstanding under a $9.5 million letter of
credit facility previously provided to the Borrowers by the Bank,
which letter of credit facility was set to mature on April 1,
2017, are treated as letters of credit under Facility 2.
the payment of a letter of credit fee to the Bank equal to a rate
per annum of 1.75% on the daily amount available to be drawn
under the letter of credit, which fee shall be payable in
quarterly installments in arrears. Letters of credit totaling
$6,186,906 that were outstanding under a $9.5 million letter of
credit facility previously provided to the Borrowers by the Bank,
which letter of credit facility was set to mature on April 1,
2017, are treated as letters of credit under Facility 2.
Under the terms of the Credit Agreement, the Bank receives an
unused facility fee on the average daily unused balance of
Facility 1 at a rate per annum equal to 0.50%, which fee is
payable quarterly in arrears and, in the event that the Borrowers
terminate the Credit Facility or refinance with another lender
within 18 months of closing, the Borrowers shall be required to
pay the Bank a breakage fee of $500,000.
unused facility fee on the average daily unused balance of
Facility 1 at a rate per annum equal to 0.50%, which fee is
payable quarterly in arrears and, in the event that the Borrowers
terminate the Credit Facility or refinance with another lender
within 18 months of closing, the Borrowers shall be required to
pay the Bank a breakage fee of $500,000.
In addition to the foregoing, the Credit Agreement contains
customary representations, warranties and affirmative and
negative covenants (including financial covenants that (i)
restrict capital expenditures, (ii) prohibit the incurrence of a
net loss commencing December 31, 2018, (iii) require a minimum
adjusted EBITDA, (iv) require a minimum tangible net worth and
(v) require the maintenance of a minimum quarterly average
aggregate balance on deposit with the Bank, which, if not
maintained, will result in the assessment of a quarterly fee of
$12,500, as well as events of default customary for facilities of
this type.
customary representations, warranties and affirmative and
negative covenants (including financial covenants that (i)
restrict capital expenditures, (ii) prohibit the incurrence of a
net loss commencing December 31, 2018, (iii) require a minimum
adjusted EBITDA, (iv) require a minimum tangible net worth and
(v) require the maintenance of a minimum quarterly average
aggregate balance on deposit with the Bank, which, if not
maintained, will result in the assessment of a quarterly fee of
$12,500, as well as events of default customary for facilities of
this type.
In connection with the Credit Agreement, the Borrowers paid the
Bank an origination fee in the amount of $250,000 and other fees
and reimbursements that are customary for facilities of this
type.
Bank an origination fee in the amount of $250,000 and other fees
and reimbursements that are customary for facilities of this
type.
The foregoing description of the Credit Agreement does not
purport to be complete and is qualified in its entirety by
reference to the full text of the Credit Agreement filed as
Exhibit 10.1 to this Current Report on Form 8-K, which is
incorporated herein by reference.
purport to be complete and is qualified in its entirety by
reference to the full text of the Credit Agreement filed as
Exhibit 10.1 to this Current Report on Form 8-K, which is
incorporated herein by reference.
| Item 1.02. |
Termination of a Material Definitive Agreement.
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Upon entry into the Credit Agreement described in Item 1.01 of
this Current Report on Form 8-K, the Borrowers terminated the
agreement among the Borrowers, the lenders party thereto and HPF
Service, LLC, as administrative agent for the lenders dated July
31, 2015 and subsequently amended memorializing the Prior Credit
Facility . The Borrowers incurred an early termination premium of
approximately $1.763 million in connection with the termination
of the Prior Credit Facility.
this Current Report on Form 8-K, the Borrowers terminated the
agreement among the Borrowers, the lenders party thereto and HPF
Service, LLC, as administrative agent for the lenders dated July
31, 2015 and subsequently amended memorializing the Prior Credit
Facility . The Borrowers incurred an early termination premium of
approximately $1.763 million in connection with the termination
of the Prior Credit Facility.
| Item 2.03. |
Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The disclosure contained in Item 1.01 of this Current Report on
Form 8-K is incorporated herein by reference.
Form 8-K is incorporated herein by reference.
| Item 8.01. |
Other Events
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On April 6, 2017, the Company issued a press release to which it
announced that it had entered into the Credit Facility. A copy of
the press release is filed as Exhibit 99.1 hereto and
incorporated herein by reference.
announced that it had entered into the Credit Facility. A copy of
the press release is filed as Exhibit 99.1 hereto and
incorporated herein by reference.
| Item 9.01. |
Financial Statements and Exhibits.
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(d)
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Exhibits:
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Exhibit
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Description
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10.1
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Credit Agreement dated as of March 31, 2017 among Lincoln
Educational Services Corporation and its subsidiaries and Sterling National Bank |
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99.1
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Press Release dated April 6, 2017 issued by Lincoln
Educational Services Corporation announcing the closing of a credit facility with Sterling National Bank |
About LINCOLN EDUCATIONAL SERVICES CORPORATION (NASDAQ:LINC)
Lincoln Educational Services Corporation is a provider of post-secondary education. The Company operates in two segments: Transportation and Skilled Trades, and Transitional. The Transportation and Skilled Trades segment offers academic programs in the disciplines of transportation and skilled trades (automotive, diesel, heating, ventilation and air conditioning (HVAC), welding and manufacturing). The Transitional segment includes operations that are being phased out and consists of its campus that is being taught out. It offers programs in automotive technology, skilled trades, which include HVAC, welding and computerized numerical control and electronic systems technology; healthcare services, which include nursing, dental assistant and pharmacy technician; hospitality services, which include culinary, therapeutic massage, cosmetology and aesthetics, and business and information technology, which includes information technology and criminal justice programs. LINCOLN EDUCATIONAL SERVICES CORPORATION (NASDAQ:LINC) Recent Trading Information
LINCOLN EDUCATIONAL SERVICES CORPORATION (NASDAQ:LINC) closed its last trading session up +0.01 at 2.75 with 170,851 shares trading hands.
