Item 1.01. Entry into a Material Definitive Agreement.
On April 28, 2020, Vail Holdings, Inc. a Delaware corporation (“VHI”) and a wholly-owned subsidiary of Vail Resorts, Inc. (the “Company”), certain subsidiaries of the Company, as guarantors, Bank of America, N.A., as administrative agent (the “Agent”), and certain Lenders entered into a Third Amendment (the “Third Amendment”) to the Eighth Amended and Restated Credit Agreement, dated as of August 15, 2018 (as so amended, and as previously amended, the “Credit Agreement”).
Pursuant to the Third Amendment, among other terms, VHI will be exempt from complying with the Credit Agreement’s maximum leverage ratio and minimum interest coverage ratio financial maintenance covenants for each of the fiscal quarters ending July 31, 2020 through January 31, 2022 (unless VHI makes a one-time irrevocable election to terminate such exemption period prior to such date) (such period, the “Financial Covenants Temporary Waiver Period”), after which VHI will again be required to comply with such covenants starting with the fiscal quarter ending April 30, 2022 (or such earlier fiscal quarter as elected by VHI). After the Financial Covenants Temporary Waiver Period, (x) the maximum leverage ratio permitted under the maximum leverage ratio financial maintenance covenant will be (A) 6.25 to 1.00 for the first full fiscal quarter ending after the expiration of the Financial Covenants Temporary Waiver Period, (B) 5.75 to 1.00 for the second full fiscal quarter ending after the expiration of the Financial Covenants Temporary Waiver Period, (C) 5.25 to 1.00 for the third full fiscal quarter ending after the expiration of the Financial Covenants Temporary Waiver Period, and (D) 5.00 to 1.00 for the fourth full fiscal quarter ending after the expiration of the Financial Covenants Temporary Waiver Period and for each fiscal quarter thereafter and (y) the minimum interest coverage ratio permitted under the minimum interest coverage ratio financial maintenance covenant will be 2.00 to 1.00.
In addition, VHI will be required to comply with a monthly minimum liquidity test (defined as unrestricted cash and temporary cash investments of VRI and its restricted subsidiaries and available commitments under VHI’s revolving credit facility) of not less than $150 million, during the period beginning July 31, 2020 and ending on the date VHI delivers a compliance certificate for the Company and its subsidiaries’ first fiscal quarter following the end of the Financial Covenants Temporary Waiver Period (such period, the “Temporary Waiver Period”).
The Company will also be prohibited, during the Temporary Waiver Period, from paying any dividends or making share repurchases, unless (x) no default or potential default exists under the Credit Agreement and (y) the Company has liquidity of at least $400 million, and the aggregate amount of dividends paid and share repurchases made by the Company during the Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter. The Company will also be prohibited, during the Temporary Waiver Period, from making capital expenditures in excess of $200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs. In addition, the Company will be prohibited, during the Temporary Waiver Period, from incurring any indebtedness secured by the collateral under the Credit Agreement other than pursuant to the existing revolving commitments under the Credit Agreement. The Company will also be prohibited, during the Temporary Waiver Period, from (x) making non-ordinary course investments in unrestricted subsidiaries unless the Company has liquidity of at least $300.0 million and (y) making investments in non-subsidiaries in excess of $50.0 million in the aggregate. In addition, the Company will be prohibited, during the Temporary Waiver Period, from acquiring all or a majority of the capital stock or all or any substantial portion of the assets of any entity or merging or consolidating with another entity.
In addition, pursuant to the Third Amendment, the amount by which we are able to increase availability (under the revolver or in the form of term loans) will be increased to an aggregate principal amount not to exceed the greater of (i) $2.25 billion and (ii) the product of 3.25 and the trailing four-quarter Adjusted EBITDA (as defined in the Credit Agreement).
The description above is a summary of the Third Amendment and is qualified in its entirety by the complete text of the Third Amendment, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2020.