Patriot National, Inc. (PN) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
| Entry into a Material Definitive Agreement. |
On November 9, 2016, Patriot National, Inc. (the Company) entered
into the Financing Agreement (the Credit Agreement), by and among
the Company, Cerberus Business Finance, LLC, as collateral agent
and as administrative agent (Agent), and the other lenders party
thereto, which provides for a $30.0 million revolving credit
facility and a $250.0 million term loan facility (the senior
secured credit facility). The senior secured credit facility has
a maturity of five years, and borrowings thereunder bear
interest, at the Companys option, at LIBOR plus a margin ranging
from 700 basis points to 725 basis points or at a base rate plus
a margin ranging from 500 basis points to 525 basis points.
Effective with the closing of the Financing Agreement on November
9, 2016, the existing BMO credit facility was repaid in full and
any remaining commitments terminated thereunder.
In addition to paying interest on outstanding principal under the
senior secured credit facility, the Company is required to pay a
commitment fee to the administrative agent for the ratable
benefit of the lenders under the revolving credit facility in
respect of the unutilized commitments thereunder of 50 basis
points. In addition, the Company is required to pay Agent a loan
servicing fee of $5,000 per month. The Company paid Agent, for
the account of the lenders, a closing fee equal to $5,600,000.
The term loan facility amortizes quarterly beginning on December
31, 2016 with quarterly payments of $1,250,000 in the first year,
quarterly payments of $2,000,000 in the second year and quarterly
payments of $2,500,000 thereafter, with the remainder due at
maturity. Principal amounts outstanding under the revolving
credit facility are due and payable in full at maturity. In the
event of any sale or other disposition by the Company or its
subsidiaries guaranteeing the senior secured credit facility of
any assets or their incurrence of additional indebtedness, the
Company is required to prepay the net proceeds received from such
a sale towards the remaining scheduled payments of the term loan
facility, subject to certain exceptions.
All obligations under the senior secured credit facility are
guaranteed by all of the Companys existing and future
subsidiaries, other than foreign subsidiaries, and secured by a
first-priority perfected security interest in substantially all
of the Companys and such guaranteeing subsidiaries tangible and
intangible assets, whether now owned or hereafter acquired,
including a pledge of 50% of the stock of each guarantor.
The senior secured credit facility contains certain covenants
that, among other things and subject to significant exceptions,
limit the Companys ability and the ability of the Companys
restricted subsidiaries to engage in certain business and
financing activities and that require the Company to maintain
certain financial covenants, including requirements to maintain
(i) a maximum total leverage ratio of total outstanding debt to
adjusted EBITDA for the most recently-ended four fiscal quarters
of no more than 5.25:1.00 and (ii) a minimum fixed charge
coverage ratio of (a)(1) adjusted EBITDA less (2) unfinanced
capital expenditures, to (b) the sum of (1) scheduled principal
payments of debt (which amount has been agreed upon for the
three, six and nine month periods ending March 31, 2016, June 30,
2016 and September 30, 2016), (2) cash interest expense (which
amount has been agreed upon for the three, six and nine month
periods ending March 31, 2016, June 30, 2016 and September 30,
2016), (3) income tax expense (which amount has been agreed upon
for the three, six and nine month periods ending March 31, 2016,
June 30, 2016 and September 30, 2016) and (4) dividends, share
repurchases and other restricted payments for the same period of
a least 1.25:1.00 for the most recently-ended four quarters. The
senior secured credit facility contains other restrictive
covenants, including those regarding indebtedness (including
capital leases) and guarantees; liens; investments and
acquisitions; loans and advances; mergers, consolidations and
other fundamental changes; limitations on sales of assets;
limitations on transactions with affiliates; no material changes
in nature of business; limitations on dividends and
distributions, stock repurchases, and other restricted payments.
The senior secured credit facility has events of default that may
result in acceleration of the borrowings thereunder, including
(i) nonpayment of principal, interest, fees or other amounts
(subject to customary grace periods for items other than
principal); (ii) failure to perform or observe covenants set
forth in the loan documentation (subject to customary grace
periods for certain affirmative covenants); (iii) any
representation or warranty proving to have been incorrect in any
material respect when made; (iv) cross-default to other
indebtedness and contingent obligations in an aggregate amount in
excess of an agreed upon amount; (v) bankruptcy and insolvency
defaults (with grace period for involuntary proceedings); (vi)
inability to pay debts; (vii) monetary judgment defaults in
excess of an agreed upon amount; (viii) ERISA defaults; (ix)
change of control; (x) actual invalidity or unenforceability of
any loan document as a result of an act or omission of the
Company or its subsidiaries or actualinvalidity or
unenforceability of any security interest on any collateral; (xi)
the Company or its subsidiaries asserts that any loan document,
including any guaranty, is invalid or unenforceable; and (xii)
material unpaid, final judgments that have not been vacated,
discharged, stayed or bonded pending appeal within a specified
number of days after the entry thereof.
Affiliates of Agent are participating as lenders under the senior
secured credit facility.
The Company used a portion of the proceeds from the senior
secured credit facility to repay its existing credit facility as
described below under Item 1.02 and intends to use the remaining
proceeds to finance a special dividend and repurchase additional
shares of Company common stock, each as described below under
Item 8.01, and for general corporate purposes.
Item1.02 |
Termination of a Material Definitive Agreement. |
The existing credit facility provided for to the Credit Agreement
entered into on January22, 2015, by and among the Company, BMO
Harris Bank N.A., as administrative agent, and the other lenders
party thereto was terminated and repaid in full with proceeds
from the senior secured credit facility described above in Item
1.01
Item2.03. |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth under Item 1.01 above is incorporated
herein by reference.
Item8.01. |
Other Events. |
Special Dividend
On November 14, 2016, the Company announced that its Board of
Directors (the Board) had declared a special dividend of $2.50
per share of Company common stock, payable December 9, 2016, to
shareholders of record at the close of business on November 28,
2016.
Stock Repurchase Program
On November 9, 2016, the Board also authorized up to $40 million
of stock repurchases through November 9, 2018 under the Companys
previously announced $15 million stock repurchase program (the
Repurchase Program).This authorization represents an increase of
$34 million for stock repurchases in addition to the
approximately $6 million remaining under the previously
authorized program. to the terms of the Repurchase Program, the
Company may purchase no more than 1,000,000 shares in any
calendar month. The Company may otherwise repurchase its common
stock from time to time, in amounts and at prices the Company
deems appropriate, subject to market conditions and other
considerations.The Companys repurchases may be executed using
open market purchases or negotiated off-market transactions.
A copy of the press release announcing the events described in
this Current Report on Form 8-K is attached as Exhibit 99.1
hereto and is incorporated herein by reference.
Item9.01. |
Financial Statements and Exhibits. |
(d) The following exhibits are attached to this Current Report on
Form 8-K.
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| 99.1 | Press Release, dated November 14, 2016. |
About Patriot National, Inc. (PN)