Item 1.01 Entry into a Material Definitive Agreement
On January 5, 2021, Avid Technology, Inc. (the "Company") entered into a Credit
Agreement (the "Credit Agreement") with each of the lenders and financial
institutions party thereto, and JPMorgan Chase Bank, N.A., as administrative
agent.
Under the Credit Agreement, the lenders have agreed to provide the Company with
(a) a term loan in the aggregate principal amount of $180 million (the "Term
Loan"), (b) a commitment for $70 million of revolving loans, with sub-limits for
multicurrency borrowings, letters of credit and swingline loans (the "Revolving
Loans") and (c) an expansion feature equal to the greater of (i) $50 million and
(ii) 75% of Consolidated EBITDA (as defined in the Credit Agreement) set forth
in the Company's most recent annual or quarterly financial statements at the
time of borrowing. Borrowings under the Term Loan may be used to refinance the
Company's indebtedness under its existing Financing Agreement, dated February
26, 2016, among the Company, Avid Technology Worldwide, Inc., Cerberus Business
Finance, LLC, as collateral agent and administrative agent, and the lenders
party thereto (as amended, the "Financing Agreement"), to finance working
capital needs and for general corporate purposes of the Company and its
subsidiaries in the ordinary course of business. Borrowings under the Revolving
Loans may be used to finance working capital needs, for general corporate
purposes of the Company or its subsidiaries and to finance permitted
acquisitions (as defined in the Credit Agreement). The Company borrowed the full
amount of the Term Loan and did not borrow any amount under the Revolving Loans
as of the closing date.
Borrowings under the Credit Agreement bear interest based on one of two options.
Alternate base rate loans will bear interest at a rate that includes a base
reference rate plus a spread of 100 - 225 basis points, depending on the
Company's leverage ratio. The base reference rate will be the greater of the (a)
prime rate and (b) federal funds effective rate plus 50 basis points and (c)
adjusted one-month London interbank offered rate ("LIBOR") plus 100 basis
points. Eurocurrency loans will bear interest based on the adjusted LIBOR plus a
spread of 200 - 325 basis points, depending on the Company's leverage ratio. The
base reference rate is subject to a floor of 125 basis points and the adjusted
LIBOR is subject to a floor of 25 basis points.
The Credit Agreement contains customary representations and warranties,
covenants, mandatory prepayments and events of default under which the Company's
payment obligations may be accelerated. The financial covenants include a
requirement to maintain (a) a total net leverage ratio of no more than (i) 4.00
to 1.00 for each fiscal quarter ending on and after March 31, 2021 through June
30, 2021, (ii) 3.75 to 1.00 for each fiscal quarter ending on and after
September 30, 2021 through December 31, 2021, (iii) 3.50 to 1.00 for each fiscal
quarter ending on and after March 31, 2022 through June 30, 2022, (iv) 3.25 to
1.00 for each fiscal quarter ending on and after September 30, 2022 through
December 31, 2022 and (v) 3.00 to 1.00 for each fiscal quarter ending on and
after March 31, 2023 and (b) a fixed charge coverage ratio of no less than 1.20
to 1.00. The Company can net up to $25.0 million in cash against total
indebtedness in the calculation of the net leverage ratio.
All obligations under the Credit Agreement are guaranteed by each of the
Company's existing and future material domestic subsidiaries, as defined in the
Credit Agreement (the "Guarantors"). The obligations are also secured by a
Pledge and Security Agreement, dated as of January 5, 2021, entered into by the
Company and the Guarantors which grants to the administrative agent, for the
benefit of the lenders, a security interest, subject to certain exceptions, in
substantially all of the non-real estate assets of the Company and the
Guarantors.
All amounts borrowed or outstanding under the Credit Agreement are due January
5, 2026, unless the commitments are terminated earlier either at the request of
the Company or if certain events of default occur.
--------------------------------------------------------------------------------
The administrative agent and the lenders under the Credit Agreement and their
affiliates may have various relationships with the Company and its subsidiaries
involving the provision of financial services, including commercial banking,
lending, cash management, financial advisory, foreign exchange, risk management,
and other services.
The foregoing description is qualified in its entirety by reference to the
Agreement, which is attached hereto as Exhibit 10.1 to this Current Report on
Form 8-K and is incorporated herein by reference.
On January 5, 2021, the Company issued a press release announcing that it had
entered into the Credit Agreement. A copy of the press release is attached to
this Current Report as Exhibit 99.1 and is incorporated herein by reference.
Item 1.02 Termination of a Material Definitive Agreement
Concurrently with the entry into the Credit Agreement, on January 5, 2021, the
Company terminated its existing Financing Agreement. The Company repaid all
outstanding borrowings under the Financing Agreement in the principal amount of
$201,207,839.34. The Company paid a prepayment premium of 0.5% of the sum of the
principal amount of the term loan repaid and the amount of the revolving
commitment under the Financing Agreement.
Item 2.03 Creation of a Direct Financial Obligation or Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The disclosure required by this Item 2.03 is included in Item 1.01 above and is
incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
Credit Agreement, dated as of January 5, 2021, among Avid Technology, Inc.,
each of the lenders and financial institutions party thereto, and JPMorgan
10.1 Chase Bank, N.A., as administrative agent.
99.1 Press Release issued by Avid Technology, Inc. dated January 5, 2021
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses