Item 1.01 Entry into a Material Definitive Agreement.
On September 26, 2022 (the "Closing Date"), CarGurus, Inc. (the "Company")
entered into a Credit Agreement (the "Agreement") by and among the Company, PNC
Bank, National Association, as administrative agent and collateral agent and an
L/C Issuer, and the other lenders, L/C Issuers and parties thereto from time to
time. The Agreement consists of a revolving credit facility with a maximum
aggregate principal amount of availability of $400.0 million (the "Credit
Facility"), which the Company may draw upon from time to time subject to the
terms and conditions set forth in the Agreement. The Credit Facility includes a
letter of credit sub-facility of up to $50.0 million in the aggregate.
Capitalized terms used in this Current Report on Form 8-K without definition
shall have the meanings assigned thereto in the Agreement.
On the Closing Date, there were no borrowings and no letters of credit
outstanding under the Credit Facility. The Credit Facility is scheduled to
mature on September 26, 2027.
Currency, Interest Rate and Fees
Extensions of credit under the Credit Facility may be denominated in U.S.
dollars or an alternative currency, including pounds sterling, euro, Canadian
dollars and other agreed currencies from time to time. Borrowings under the
Credit Facility bear interest at a rate per annum equal to, at the Company's
option, (i) for each SOFR Loan, the sum of the Adjusted Term SOFR Rate for such
Interest Period and the Applicable Rate; (ii) for each Alternative Currency Loan
(other than any Alternative Currency Loan bearing interest based on Adjusted
Daily Simple RFR), the sum of the Adjusted Alternative Currency Rate and the
Applicable Rate for Alternative Currency Loans; (iii) for each RFR Loan, the sum
of the Adjusted Daily Simple RFR and the Applicable Rate; or (iv) for each Base
Rate Loan, the sum of the Base Rate plus the Applicable Rate. The Applicable
Rate ranges from 1.00% to 1.50% for SOFR Loans, Alternative Currency Loans and
Adjusted Daily Simple RFR Loans and 0.00% to 0.50% for Base Rate Loans Rate and
is determined based on the ratio of the outstanding principal amount of the
Company's secured indebtedness to the trailing four quarters of consolidated
EBITDA (as determined under the Agreement, the "Consolidated Secured Net
Leverage Ratio"), as measured on a quarterly basis. The Agreement also requires
the Company to pay a commitment fee to the lenders in respect of the unutilized
revolving commitments at a rate ranging from 0.125% to 0.175% based on the
Consolidated Secured Net Leverage Ratio, as determined on a quarterly basis. The
Company will also pay letter of credit fees to the lenders in an amount equal to
(i) the Applicable Rate then in effect for SOFR Loans (bearing interest based on
the Adjusted Daily Simple RFR) plus a fronting fee of 0.125%, multiplied by (ii)
the daily maximum amount then available to be drawn under such letter of credit,
as determined on a quarterly basis.
Guarantees and Security
The obligations under the Credit Facility are guaranteed on the Closing Date by
the Company and its subsidiary, Auto List, Inc. (the "Borrower Parties"). The
obligations under the Credit Facility will be guaranteed in the future by the
Company's newly formed or acquired wholly-owned U.S. subsidiaries, if any,
subject to certain conditions and exceptions set forth in the Agreement, and by
CarOffer, LLC, a Delaware limited liability company ("CarOffer"), under certain
circumstances at such time it were to become a wholly-owned subsidiary of the
Company. In addition, the obligations under the Credit Facility are secured by a
first priority lien on substantially all tangible and intangible property of the
Borrower Parties, including any future guarantors, and pledges of the equity of
CarOffer and certain wholly-owned subsidiaries, in each case subject to certain
exceptions, limitations and exclusions from the collateral.
Certain Covenants and Events of Default
The Agreement contains customary affirmative covenants, including financial
statement reporting requirements and delivery of compliance certificates,
including with respect to the Consolidated Secured Net Leverage Ratio. The
Agreement also contains customary negative covenants that limit the Company's
and its Restricted Subsidiaries' ability to, among other things, grant or incur
liens, incur additional indebtedness, make certain restricted investments or
payments, including payment of dividends on its capital stock, enter into
certain mergers and acquisitions or engage in certain asset sales, subject in
each case to certain exceptions. In addition, the Agreement contains a financial
covenant that the Consolidated Secured Net Leverage Ratio, as of the last day of
any fiscal quarter of the Borrower, commencing with the fiscal quarter ending
September 30, 2022, shall not be greater than 3.50:1.00, except that upon the
consummation of certain acquisitions for the quarter in which such acquisition
is consummated and for the immediately succeeding three fiscal quarters, the
permitted ratio shall be automatically increased to 4.00:1.00, provided that
following such four-quarter period, the ratio will automatically step down to
3.50:1.00 for at least one fiscal quarter even if there is a subsequent
acquisition that would otherwise require a 4.00:1.00 ratio, with such increased
ratio to apply following such fiscal quarter.
The Credit Agreement also contains customary events of default (subject to
certain exceptions, thresholds and grace periods), such as the failure to pay
obligations when due, breach of certain covenants, including the financial
covenant, cross-default or cross-acceleration of certain indebtedness,
bankruptcy-related defaults, judgment defaults, and the occurrence of certain
change of control
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events involving the Company. The occurrence of an event of default may result
in the termination of the Agreement and acceleration of repayment obligations
with respect to any outstanding loans or letters of credit under the Credit
Facility.
The foregoing description of the material terms of the Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by,
reference to the Agreement, which is filed as Exhibit 10.1 with this Current
Report on Form 8-K.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
The Board of the Directors of the Company has determined not to exercise the
Company's call right (the "2022 Call Right") to acquire up to an additional 25%
of the fully diluted capitalization of CarOffer. The Company holds the 2022 Call
Right under the Third Amended and Restated Limited Liability Company Agreement,
dated November 23, 2021, by and among the Company, CarOffer, CarOffer Investors
Holding, LLC, a Delaware limited liability company ("TopCo"), each of the
Members of TopCo, and CarOffer MidCo, LLC, a Delaware limited liability company
("MidCo") (the "Operating Agreement"), as amended by the Corrective Amendment,
dated May 6, 2022, by and among the Company, CarOffer, TopCo and MidCo (the
"Amendment"). The Company's determination as to its 2022 Call Right does not
alter its call rights or the put rights held by the representative of the
holders of the remaining 49% equity interest in CarOffer (the "Remaining
Equity"), in each case, that such parties may exercise in the second half of
2024. The mechanics of whether such call or put right is ultimately exercised in
2024 and the purchase price calculation methodologies associated with such
rights are as set forth in the Operating Agreement and the Amendment, which are
attached as Exhibit 10.27 to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on February 25, 2022 and Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on May 9, 2022, respectively.
The information in this Item 7.01 is intended to be furnished and shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities
of that section, nor shall it be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except as
expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
10.1* Credit Agreement, dated September 26, 2022, by and among CarGurus,
Inc., as borrower, PNC Bank, National Association, as administrative
agent, collateral agent and an L/C Issuer, and the other lenders, L/C
Issuers and other parties party thereto.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
* Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of
Regulation S-K and will be provided on a supplemental basis to the Securities
and Exchange Commission upon request.
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