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Item 1.01
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Entry into a Material Definitive Agreement.
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In connection with the Merger, Merger Sub (i) issued $600 million principal amount of senior secured notes due 2027 (the “Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, and (ii) entered into a credit agreement dated as of October 2, 2019, between Merger Sub, inter alios, certain lenders party thereto and BNP Paribas, as administrative agent and Deutsche Bank Trust Company Americas as the collateral agent (the “Agent”), (the “New Credit Facilities Agreement”). The Notes were issued pursuant to an indenture dated as of October 2, 2019, between Merger Sub and Deutsche Bank Trust Company Americas, as trustee, paying agent, transfer agent and registrar (the “Indenture”).
As of the Effective Time, the Notes and the New Credit Facilities (as defined below) became obligations of the Company and the Company entered into a supplemental indenture to the Indenture (the “Target Supplemental Indenture”). Within two business days of the Effective Time, each existing material wholly-owned direct or indirect subsidiary of the Company that is organized in the U.S. (the “Initial U.S. Guarantors”) will become a guarantor under the Indenture and the New Credit Facilities Agreement and within 90 days of the Effective Time, each existing material wholly-owned direct or indirect subsidiary of the Company that is organized in England and Wales, Luxembourg or Hong Kong (the “Initial Non-U.S. Guarantors”) will become a guarantor under the Indenture and the New Credit Facilities Agreement.
Notes
The Notes bear interest at a rate of 7.375% per annum and mature on October 15, 2027. Interest on the Notes will be payable semi-annually in arrears on June 1 and December 1 of each year.
The Notes rank equally in right of payment with any existing or future indebtedness of the Company that is not subordinated in right of payment to the Notes, including the Company’s obligations under the New Credit Facilities (as defined below). The Notes rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Notes. The Notes are effectively subordinated to any of the Company’s existing and future indebtedness that is secured by property or assets that do not secure the Notes, to the extent of the value of such property and assets securing such indebtedness. In addition, the Notes are structurally subordinated to the existing and future liabilities of the Company’s subsidiaries that do not guarantee the Notes following the Effective Time. The Notes will be guaranteed on a senior secured basis (the “Guarantees”) jointly and severally by BidFair Holdings Inc., a Delaware corporation and wholly owned subsidiary of Parent (“BidFair”), and each of Company’s existing and future material wholly-owned restricted subsidiaries organized in the U.S., England and Wales, Luxembourg and Hong Kong that guarantee the New Credit Facilities or that guarantee certain of its other indebtedness or certain indebtedness of a guarantor (subject to certain exceptions) (collectively, the “Subsidiary Guarantors”, and together with BidFair, the “Guarantors”). The Guarantees will rank equally in right of payment to the existing and future senior indebtedness of the Guarantors, including the Existing Notes and the New Credit Facilities, and rank senior in right of payment to any existing and future subordinated obligations of the Guarantors. The Guarantees are required to be provided within two business days following the Effective Time (in the case of the Initial U.S. Guarantors) and within 90 days following the Effective Time (in the case of the Initial Non-U.S. Guarantors).
The Company may redeem some or all of the Notes at any time on or after October 15, 2022, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. The Company may also redeem up to 40% of each series of the Notes using the proceeds of certain equity offerings before October 15, 2022, at a redemption price equal to 107.375% for the Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to October 15, 2022, the Company may redeem some or all of the Notes, at a
price equal to 100% of the principal amount thereof, plus a “make whole” premium specified in the Indenture plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
The Indenture contains certain covenants and agreements, including limitations on the ability of the Company and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) make investments or other restricted payments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem its capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances, and (viii) engage in mergers or consolidations, in each case subject to certain exceptions. The Indenture also contains certain customary events of default. If an event of default occurs, the obligations under the Notes and the Indenture may be accelerated.
New Credit Facilities
The New Credit Facility Agreement provides (i) U.S. dollar-denominated term loans in an aggregate principal amount of $500 million which will be available in up to two drawings (the “New Term Loan Facility”); and (ii) U.S. dollar-denominated revolving loan commitments in an aggregate principal amount of $400 million (the “New Revolving Credit Facility”, and together with the New Term Loan Facility, the “New Credit Facilities”). The New Term Loan Facility will mature in January 2027 and the New Revolving Credit Facility will mature in October 2024. Capitalized terms used under this heading “New Credit Facilities” and not otherwise defined herein shall have the meanings given to them in the New Credit Facilities Agreement.
The New Credit Facility Agreement also permits the Company to request revolving loans, swing line loans or letters of credit from the revolving lenders thereunder, from time to time from and after the initial funding date under the New Credit Facilities (the “New Term Loan Facility Funding Date”) and prior to the date that is five years from the Effective Time. Availability of the New Revolving Credit Facility on any such date is subject to specified conditions precedent and usage of the New Revolving Credit Facility on or prior to the Effective Time Date cannot exceed $160 million.
Interest Rates
Loans comprising each Eurodollar Borrowing or ABR Borrowing, as applicable, shall bear interest at a rate per annum equal to the Adjusted LIBO Rate or the Alternate Base Rate, as applicable, plus the Applicable Margin, where the Applicable Margin means:
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in respect of Initial Term Loans (i) with respect to any ABR Loan, 4.50% per annum and (ii) with respect to any Eurodollar Loan, 5.50% per annum, and
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in respect of Initial Revolving Credit Loans (i) with respect to any ABR Loan, 2.75% per annum and (ii) with respect to any Eurodollar Loan, 3.75% per annum.
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Mandatory Prepayments
The New Credit Facility Agreement requires the Company to prepay outstanding term loans under the New Term Loan Facility, subject to certain exceptions and deductions, with (i) 100% of the net cash proceeds of certain asset sales, subject to reinvestment rights and certain other exceptions; and (ii) commencing with the fiscal year ending 2020, a pari ratable share (based on the outstanding principal amount of the term loans under the New Credit Facilities divided by the outstanding principal amount of all pari passu indebtedness (including the term loans under the New Credit Facilities)) of 50% of the Company’s annual excess cash flow, which will be reduced to (x) 25% if the Consolidated Net Leverage Ratio is less than or equal to 4.50: 1.00 and greater than 3.75 to 1.00, and (y) 0% if the Consolidated Net Leverage Ratio is less than or equal to 3.75: 1.00 and subject to other customary deductions.
Voluntary Prepayments
Prepayments of the loans under the New Term Loan Facility, on or prior to the 12-month anniversary of the New Term Loan Facility Funding Date which are either (x) in connection with a Repricing Transaction or (y) effect any amendment of the New Credit Facility resulting in a Repricing Transaction, are subject to a call premium payable to the administrative agent on behalf of the lenders of, in the case of (x) 1.00% of the principal amount of the New Term Loan Facility so repaid and in the case of (y) a payment equal to 1.00% of the aggregate amount of the New Term Loan Facility subject to such Repricing Transaction.
Amortization and Final Maturity
Beginning on the last day of the first full fiscal quarter ended after the date that is the later of the (x) Effective Time and (y) the date of settlement of the Change of Control Tender, the Company will be required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the term loans borrowed under the New Term Loan Facility, with the balance expected to be due on the final maturity date. The maturity date of the (i) New Term Loan Facility is expected to be in January 2027 and (ii) New Revolving Credit Facility is expected to be in October 2024.
Guarantees; Security
The obligations of the Company under the New Credit Facilities will be guaranteed, on a senior basis, (i) within 2 business days following the Effective Time, by the Initial U.S. Guarantors; and (ii) within 90 business days following the Effective Time, by the Initial Non-U.S. Guarantors (or, in each case, such later date as may be reasonably agreed by the Company and the Agent and pursuant to arrangements to be mutually agreed by the Company and the Agent). In addition, the New Credit Facilities will be guaranteed by each future material wholly-owned restricted subsidiary of the Company that is organized in the U.S., England and Wales, Luxembourg and Hong Kong, subject to certain limitations set forth in the New Credit Facilities documentation.
The obligations of the Company under the New Credit Facilities will be secured by (a) first-priority security interests in substantially all of the collateral of the Subsidiary Guarantors (other than any Subsidiary Guarantor incorporated in Luxembourg (“Luxembourg Guarantor”)) and the Issuer (other than any real estate, and subject to certain others exceptions) which currently secures the Issuer obligations under the Existing Credit Facility Agreement (as defined below), (b) without limiting clause (a) above, all of the equity interests (i) of the Company held by BidFair and (ii) of any Subsidiary Guarantor incorporated in the U.S., England and Wales, Luxembourg and Hong Kong held by any Luxembourg Guarantor and (c) without limiting clause (a) above, any intercompany loans (i) from BidFair to the Company and (ii) from any Luxembourg Guarantor to any other Restricted Subsidiary (together, the “Senior Credit Facilities Collateral”), provided that such Senior Credit Facilities Collateral shall be required to be delivered or provided (x) in the case of the Company or of any other Initial U.S. Guarantor (with respect to assets located in the U.S.), within 2 business days after the Effective Time and (y) in the case of any Initial Non-U.S. Guarantor or in the case of any Initial U.S. Guarantor with respect to assets located outside the U.S. (if any) that are required to be pledged by such Initial U.S. Guarantor, subject to certain agreed security principles, within 90 days after the Effective Time (or, in each case, such later date as may be reasonably agreed by the Company and the Agent and pursuant to arrangements to be mutually agreed by the Company and the Agent).
Certain Covenants and Events of Default
The New Credit Facilities Agreement includes negative covenants that substantially reflect the covenants contained in the Indenture governing the Notes and, subject to certain significant exceptions and qualifications, will limit the Company’s ability and the ability of its restricted subsidiaries to: (i) incur or guarantee additional Indebtedness, subject to an incurrence based consolidated net leverage ratio or a consolidated net senior secured leverage test, (ii) make investments or other restricted payments, (iii) create liens, (iv) sell assets and subsidiary stock, (v) pay dividends or make other distributions or repurchase or redeem the Company’s capital stock or subordinated debt, (vi) engage in certain transactions with affiliates, (vii) enter into agreements that restrict the payment of dividends by subsidiaries or the repayment of intercompany loans and advances; and (viii) engage in mergers or consolidations. The New Revolving Credit Facility will include a financial maintenance covenant solely for the benefit of the lenders under the New Revolving Credit Facility consisting of a maximum consolidated net senior secured leverage ratio of the Company and its restricted subsidiaries of 6.50: 1.0. The financial covenant will be tested on the last day of any fiscal quarter (commencing with the last day of the first full fiscal quarter ended after the Effective Time) but solely for the purpose of the New Revolving Credit Facility only if on such day the outstanding borrowings under the New Revolving Credit Facility (other than cash collateralized or undrawn letters of credit) exceed 40% of the total commitments under the New Revolving Credit Facility.
The New Credit Facilities Agreement also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under the New Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the New Credit Facilities and all actions permitted to be taken by a secured creditor, subject to the Intercreditor Agreement.
