Item 1.01. Entry Into a Material Definitive Agreement
On August 3, 2021 (the “Effective Date”), SPX FLOW, Inc. (the “Company” and, together with certain of its subsidiaries, “we” or “us”) amended and restated its senior credit facilities (which were previously amended and restated on June 27, 2019) with a syndicate of lenders, which provides for committed senior secured financing in an aggregate amount of $960.5 million, consisting of the following:
•a domestic revolving credit facility, available for loans and letters of credit, in an aggregate principal amount up to $189.1 million, with a final maturity of August 3, 2026;
•a global revolving credit facility, available for loans in Euros, Sterling, and other currencies, in an aggregate principal amount up to the equivalent of $283.6 million, with a final maturity of August 3, 2026;
•a bilateral foreign credit instrument facility, available for performance letters of credit and guarantees in Euros, Sterling, and other currencies, in an aggregate principal amount up to the equivalent of $110.5 million, with a final maturity of August 3, 2026;
•a new term loan facility in an aggregate principal amount of $100 million, with a final maturity of August 3, 2026; and
•a delayed draw term loan facility in an aggregate principal amount of $277.3 million, with a final maturity of August 3, 2026.
We also may seek additional commitments, without consent from the existing lenders, to add an incremental term loan facility, increase the commitments in respect of the domestic revolving credit facility, the global revolving credit facility, and/or the bilateral foreign credit instrument facility and/or incur certain other equivalent indebtedness by an aggregate principal amount not to exceed (x) the greater of (i) $275 million and (ii) an amount equal to 100% of consolidated adjusted EBITDA for the four fiscal quarters ended most recently before such date plus (y) an unlimited amount so long as, immediately after giving effect thereto, our Consolidated Senior Secured Leverage Ratio (as defined in the credit agreement generally as the ratio of consolidated total debt (excluding the face amount of undrawn letters of credit, bank undertakings, or analogous instruments and net of cash and cash equivalents) at the date of determination secured by liens to consolidated adjusted EBITDA for the four fiscal quarters ended most recently before such date) does not exceed 2.75:1.00 plus (z) an amount equal to all voluntary prepayments of the term loan facility and the delayed draw term loan facility and voluntary prepayments accompanied by permanent commitment reductions of the domestic revolving credit facility, the global revolving credit facility, and the bilateral foreign credit instrument facility.
The Company is the borrower under all of the senior credit facilities, and the Company may designate certain of its foreign subsidiaries to be co-borrowers under the global revolving credit facility and the bilateral foreign credit instrument facility.
All borrowings and other extensions of credit under our senior credit facilities are subject to the satisfaction of customary conditions, including absence of defaults and accuracy in material respects of representations and warranties.
The letters of credit under the domestic revolving credit facility are stand-by letters of credit requested by the Company on behalf of itself or any of its subsidiaries or certain joint ventures. The bilateral foreign credit instrument facility is used to issue foreign credit instruments, including bank undertakings to support our foreign operations.
The interest rates applicable to loans under our senior credit facilities are, at our option, equal to either (x) an alternate base rate (the highest of (a) the effective federal funds rate plus 0.5%, (b) the “prime rate” of Bank of America, N.A., and (c) the one-month LIBOR rate plus 1.0%), (y) a reserve-adjusted LIBOR rate for dollars (“Eurodollar”), or (z) certain alternative currency floating rates, plus, in each case, an applicable margin percentage, which varies based on our Consolidated Leverage Ratio (as defined in the credit agreement generally as the ratio of consolidated total debt (excluding the face amount of undrawn letters of credit, bank undertakings or analogous instruments and net of cash and cash equivalents) at the date of determination to consolidated adjusted EBITDA for the four fiscal quarters ended most recently before such date). We may elect interest periods of one, three, or six months (and, if consented to by all relevant lenders, twelve months or less) for Eurodollar rate borrowings and certain alternative currency rate borrowings. The per annum fees charged and the interest rate margins applicable to the loans are as follows:
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Consolidated Leverage Ratio
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Domestic Revolving Commitment Fee
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Global Revolving Commitment Fee
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Financial Letter of Credit Fee
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FCI Commitment Fee
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FCI Fee and Non-Financial Letter of Credit Fee
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Eurodollar Rate Loans
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ABR Loans
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Greater than or equal to 3.50 to 1.0
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0.300%
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0.300%
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2.000%
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0.300%
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1.200%
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2.000%
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1.000%
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Less than 3.50 to 1.0 but greater than or equal to 2.50 to 1.0
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0.275%
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0.275%
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1.750%
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0.275%
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1.050%
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1.750%
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0.750%
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Less than 2.50 to 1.0 but greater than or equal to 1.50 to 1.0
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0.250%
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0.250%
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1.500%
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0.250%
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0.900%
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1.500%
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0.500%
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Less than 1.50 to 1.0
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0.225%
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0.225%
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1.250%
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0.225%
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0.750%
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1.250%
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0.250%
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The fees for bilateral foreign credit commitments are as specified above for foreign credit instrument commitments unless otherwise agreed with the bilateral foreign issuing lender. We also pay fronting fees on the outstanding amounts of financial letters of credit at the rate of 0.125% per annum and non-financial letters of credit at the rate of 0.250% per annum
Our senior credit facilities require mandatory prepayments in amounts equal to the net proceeds from the sale or other disposition of, including from any casualty to, or governmental taking of, property in excess of specified values (other than in the ordinary course of business and subject to other exceptions) by the Company or its subsidiaries. Mandatory prepayments will be applied to repay, first, amounts outstanding under any term loans (including delayed draw term loans) and, then, amounts outstanding under the global revolving credit facility and the domestic revolving credit facility (without reducing the commitments thereunder). No prepayment is required generally to the extent the net proceeds are reinvested (or committed to be reinvested) in permitted acquisitions, permitted investments or assets to be used in our business within 360 days (and if committed to be reinvested, actually reinvested within 180 days after the end of such 360-day period) of the receipt of such proceeds.
We may voluntarily prepay loans under our senior credit facilities, in whole or in part, without premium or penalty. Any voluntary prepayment of loans will be subject to reimbursement of the lenders’ breakage costs in the case of a prepayment of Eurodollar rate or alternative currency term rate borrowings other than on the last day of the relevant interest period.
Indebtedness under our senior credit facilities is guaranteed by:
•each existing and subsequently acquired or organized domestic material subsidiary of the Company (with certain exceptions); and
•solely with respect to the obligations of our foreign borrower subsidiaries under the global revolving credit facility and the bilateral foreign credit instrument facility, the Company.
Indebtedness under our senior credit facilities is secured by (i) a first priority pledge and security interest in 100% of the capital stock of our domestic subsidiaries (with certain exceptions) held by the Company or the domestic subsidiary guarantors and 65% of the capital stock of our material first-tier foreign subsidiaries (with certain exceptions), (ii) first priority security interests and other liens on substantially all of the personal property of the Company and its domestic subsidiary guarantors (with certain exceptions), and (iii) a lien on our corporate headquarters. If the Company’s corporate credit rating is “Baa3” or better by Moody’s or “BBB-” or better by S&P and no defaults exist or would result therefrom, then all collateral security will be released and the indebtedness under our senior credit facilities will be unsecured.
Our senior credit facilities require that the Company maintains:
•a Consolidated Interest Coverage Ratio (as defined in the credit agreement generally as the ratio of consolidated adjusted EBITDA for the four fiscal quarters ended on such date to consolidated cash interest expense for such period) as of the last day of any fiscal quarter of at least 3.00 to 1.00; and
•a Consolidated Leverage Ratio as of the last day of any fiscal quarter of not more than 4.00 to 1.00.
Our senior credit facilities also contain covenants that, among other things, restrict our ability to incur additional indebtedness, grant liens, make investments, loans, guarantees, or advances, make restricted junior payments, including dividends, redemptions of capital stock, and voluntary prepayments or repurchase of certain other indebtedness, engage in mergers, acquisitions or sales of assets, or engage in certain transactions with affiliates, and otherwise restrict certain corporate activities. Our senior credit facilities contain customary representations, warranties, affirmative covenants and events of default.
We are permitted under our senior credit facilities to repurchase our capital stock and pay cash dividends in an unlimited amount if our Consolidated Leverage Ratio is (after giving pro forma effect to such payments) less than 2.50 to 1.00. If our Consolidated Leverage Ratio is (after giving pro forma effect to such payments) greater than or equal to 2.50 to 1.00, the aggregate amount of such repurchases and dividend declarations cannot exceed (A) $100 million in any fiscal year plus (B) an additional amount for all such repurchases and dividend declarations made after the Effective Date equal to the sum of (i) $300 million plus (ii) a positive amount equal to 50% of cumulative Consolidated Net Income (as defined in the credit agreement generally as consolidated net income subject to certain adjustments solely for the purposes of determining this basket) during the period from the Effective Date to the end of the most recent fiscal quarter preceding the date of such repurchase or dividend declaration for which financial statements have been (or were required to be) delivered (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit) plus (iii) certain other amounts.
The proceeds of the initial borrowing will be used in part to refinance indebtedness outstanding under the existing credit agreement, and the proceeds of the delayed draw term loans will be used to redeem the 2026 Notes (as defined below).
The foregoing summary of our senior credit facilities does not purport to be complete and is qualified in its entirety by reference to the terms of the credit agreement, which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information disclosed above under Item 1.01 is incorporated herein by reference.
Item 8.01. Other Events
On August 3, 2021, the Company issued an irrevocable notice of redemption (the “Notice”) with respect to its 5.875% Senior Notes due 2026 (the “2026 Notes”). Pursuant to the Notice, the Company gave holders of the 2026 Notes notice that it will redeem all of the outstanding 2026 Notes on September 2, 2021 (the “Redemption Date”). The 2026 Notes, which have an outstanding principal balance of $300.0 million, will be redeemed in full pursuant to the redemption provisions of the indenture governing the 2026 Notes for a redemption price equal to 102.938% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the Redemption Date. The Company plans to fund the redemption with the proceeds of the delayed draw term loan and other available cash.
Item 9.01. Financial Statements and Exhibits.
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Exhibit
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Number
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Description
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Second Amended and Restated Credit Agreement, dated as of August 3, 2021, among SPX FLOW, Inc., the foreign subsidiary borrowers from time to time party thereto, Bank of America, N.A., as Administrative Agent, Deutsche Bank AG Deutschlandgeschäft Branch, as Foreign Trade Facility Agent, and the other agents and lenders from time to time party thereto
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104
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Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL)
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