Item 1.01 Entry into a Material Definitive Agreement.
Indenture
On April 18, 2018, Compass
Group Diversified Holdings LLC (the
Company
) consummated the issuance and sale of $400,000,000 aggregate principal amount of its 8.000% Senior Notes due 2026 (the
Notes
) offered pursuant to a
private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the
Securities Act
), and to
non-U.S.
persons under
Regulation S under the Securities Act. The Company will use the net proceeds from the sale of the Notes to repay debt under its existing credit facilities in connection with a concurrent refinancing transaction described below. Any remaining
proceeds are expected to be used for general corporate purposes.
The Notes were issued pursuant to an indenture, dated as of
April 18, 2018 (the
Indenture
), between the Company and U.S. Bank National Association, as trustee (the
Trustee
). A copy of the Indenture (including the form of Note) is filed as Exhibit 4.1
to this Current Report on Form
8-K.
The description of the Indenture in this report is a summary and is qualified in its entirety by the terms of the Indenture.
The Notes will bear interest at the rate of 8.000% per annum and will mature on May 1, 2026. Interest on the Notes is payable in cash on
May 1 and November 1 of each year, beginning on November 1, 2018.
At any time prior to May 1, 2021, the Company may
on any one or more occasions redeem up to 40% of the aggregate principal amount of the Notes outstanding under the Indenture (provided that at least 60% of the Notes issued under the Indenture remain outstanding), at a redemption price equal to 108%
of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, with the net cash proceeds of one or more equity offerings (as defined in the Indenture), subject to
certain conditions. At any time prior to May 1, 2021, the Company may also redeem the Notes at its option, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus the applicable
premium (as defined in the Indenture) as of, and accrued and unpaid interest to, but not including, the applicable redemption date. On or after May 1, 2021, the Company may redeem all or a part of the Notes, on any one or more occasions,
at the redemption prices set forth in the Indenture, beginning at 104% of the principal amount of the Notes to be redeemed if redeemed during the twelve-month period beginning on May 1, 2021 and decreasing over the succeeding two years to
100.0% of the principal amount to be redeemed beginning on or after May 1, 2023, plus, in each case, accrued and unpaid interest thereon, if any, to, but not including, the applicable redemption date.
Upon a change of control, as defined in the Indenture, the Company will be required to make an offer to purchase the Notes at a purchase price
equal to 101% of the principal amount of the Notes on the date of purchase, plus accrued interest, if any, to but excluding the redemption date.
The Notes are general senior unsecured obligations of the Company and are not guaranteed by the subsidiaries through which the Company
currently conducts substantially all of its operations. The Notes rank equal in right of payment with all of the Companys existing and future senior unsecured indebtedness, and rank senior in right of payment to all of the Companys
future subordinated indebtedness, if any. The Notes will be effectively subordinated to the Companys existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including the indebtedness
under the Companys credit facilities described below.
The Indenture contains several restrictive covenants including, but not
limited to, limitations on the following: (i) the incurrence of additional indebtedness, (ii) restricted payments, (iii) dividend and other payments affecting restricted subsidiaries, (iv) the issuance of preferred stock of
restricted subsidiaries, (v) transactions with affiliates, (vi) asset sales and mergers and consolidations, (vii) future subsidiary guarantees and (viii) liens, subject in each case to certain exceptions.
The Indenture contains customary terms that upon certain events of default occurring and continuing, either the trustee or the holders of not
less than 25% in aggregate principal amount of the Notes then outstanding may declare the principal of the Notes and any accrued and unpaid interest through the date of such declaration immediately due and payable. In the case of certain events of
bankruptcy or insolvency relating to the Company, the principal amount of the Notes, together with any accrued and unpaid interest thereon through the occurrence of such event, will automatically become and be immediately due and payable.
Amended and Restated Credit Agreement
On April 18, 2018 (the
Closing Date
), the Company entered into an Amended and Restated Credit Agreement to amend
and restate the Credit Agreement, originally dated as of June 6, 2014 (as previously amended, the
Existing Credit Agreement
and as further amended by the Amended and Restated Credit Agreement, the
New
Credit Agreement
), among the Company, the lenders from time to time party thereto (the
Lenders
), Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (the
Agent
), and the other agents party thereto.
The New Credit Agreement provides for (i) revolving loans,
swing line loans and letters of credit (the
New Revolving Line of Credit
) up to a maximum aggregate amount of $600 million (the
New Revolving Loan Commitment
), and (ii) a
$500 million term loan (the
New Term Loan
). The New Term Loan was issued at an original issuance discount of 99.75%. The New Term Loan requires quarterly payments of $1.25 million commencing June 30, 2018,
with a final payment of all remaining principal and interest due on April 18, 2025, which is the New Term Loans maturity date. All amounts outstanding under the New Revolving Line of Credit will become due on April 18, 2023, which is
the maturity date of loans advanced under the New Revolving Line of Credit and the termination date of the New Revolving Loan Commitment. The New Credit Agreement also permits the Company, prior to the applicable maturity date, to increase the New
Revolving Loan Commitment and/or obtain additional term loans in an aggregate amount of up to $250 million (the
Incremental Loans
), subject to certain restrictions and conditions. On the Closing Date, the New Term Loan
was advanced in full and the initial borrowings outstanding under the New Revolving Line of Credit were approximately $73 million.
The Company used the proceeds from the New Credit Agreement and the proceeds from the Notes offering to pay all amounts outstanding under the
Existing Credit Agreement and to pay fees, original issue discount and expenses incurred in connection with the New Credit Agreement and Notes. Further advances under the New Revolving Line of Credit and any Incremental Loans may be used to finance
working capital, capital expenditures and other general corporate purposes of the Company (including to fund acquisitions of additional businesses, permitted distributions and loans by the Company to its subsidiaries) and, in the case of Incremental
Loans that are term loans, to repay amounts outstanding under the New Revolving Line of Credit.
The Company may borrow, prepay and
reborrow principal under the New Revolving Line of Credit from time to time during its term. Advances under the New Revolving Line of Credit can be either Eurodollar rate loans or base rate loans. Eurodollar rate revolving loans bear interest on the
outstanding principal amount thereof for each interest period at a rate per annum based on the London Interbank Offered Rate approved by the Agent (the
Eurodollar Rate
) for such interest period
plus
a margin
ranging from 1.50% to 2.50%, based on the ratio of consolidated net indebtedness to adjusted consolidated earnings before interest expense, tax expense, and depreciation and amortization expenses for such period (the
Consolidated Total
Leverage Ratio
). Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds rate plus 0.50%, (ii) the rate of interest in effect for such
day as publicly announced from time to time by the Agent as its prime rate, and (iii) Eurodollar Rate plus 1.0% (the
Base Rate
), plus a margin ranging from 0.50% to 1.50%, based on its Consolidated Total
Leverage Ratio.
Advances under term loans can be either Eurodollar rate loans or base rate loans. Eurodollar rate term loans bear
interest on the outstanding principal amount thereof for each interest period at a rate per annum based on the Eurodollar Rate for such interest period plus a margin of either 2.25% or 2.50%, based on the Consolidated Total Leverage Ratio. Base rate
term loans bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus either 1.25% or 1.50%, based on the Consolidated Total Leverage Ratio. The initial New Term Loan
was advanced as a Eurodollar rate loan.
The Company will pay to the Agent on a quarterly basis, for the account of each Lender in
accordance with its applicable percentage of the New Revolving Loan Commitment, a commitment fee equal to the product of (i) a rate ranging from 0.25% to 0.45% per annum, based on its Consolidated Total Leverage Ratio, times (ii) the
actual daily amount by which the New Revolving Loan Commitment exceeds the sum of (A) the outstanding
amount of revolving loans plus (B) the outstanding amount of letter of credit obligations. The Company will pay to the Agent on a quarterly basis, for the account of each Lender in
accordance with its applicable percentage of the New Revolving Loan Commitment, a letter of credit fee equal to a rate ranging from 1.50% to 2.50%, based on its Consolidated Total Leverage Ratio, times the daily amount available to be drawn under
such letters of credit (the
Stated Amount
). The Company will also pay to the Agent letter of credit fronting fees equal to 0.125% per annum with respect to each letter of credit issued by the Agent and certain other
administrative and agency fees.
The New Credit Agreement provides for a
sub-facility
under the
New Revolving Line of Credit pursuant to which letters of credit may be issued in an aggregate Stated Amount not to exceed $100 million outstanding at any time. Additionally, the New Credit Agreement provides for a
sub-facility
under the New Revolving Line of Credit pursuant to which swing line loans may be advanced in an aggregate principal amount not to exceed $25 million outstanding at any time. At no time, after
giving effect to any swing line loan, may (i) the total revolving loans outstanding exceed the Companys borrowing availability under the New Credit Agreement; and (ii) any Lenders aggregate principal amount of outstanding
revolving loans, participation in letter of credit obligations and swing line loans exceed such Lenders portion of the New Revolving Loan Commitment.
The New Revolving Line of Credit and the New Term Loan are secured by all of the assets of the Company, including all of its equity interests
in, and loans to, its subsidiaries, pursuant to an Amended and Restated Security and Pledge Agreement dated as of April 18, 2018 between the Company and the Agent for the benefit of the Lenders (the
New Security
Agreement
).
Upon the occurrence of an event of default under the New Credit Agreement, the New Revolving Loan Commitment
may be terminated, the New Term Loan and all outstanding revolving loans and other obligations under the New Credit Agreement may become immediately due and payable and any letters of credit then outstanding may be required to be cash
collateralized, and the Agent and the Lenders may exercise any rights or remedies available to them under the New Credit Agreement, the New Security Agreement or any other documents delivered in connection therewith. Any such event may materially
impair the Companys ability to conduct its business.
The foregoing brief description of the New Credit Agreement is not meant to be
exhaustive and is qualified in its entirety by the New Credit Agreement itself, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.