Item 1.01. Entry into a Material Definitive Agreement.
On June 30, 2022 (the "Fifth Amendment Effective Date"), Ribbon Communications
Inc. (the "Company"), Ribbon Communications Operating Company, Inc. (the
"Borrower"), and certain of their subsidiaries entered into a Fifth Amendment to
Credit Agreement (the "Fifth Amendment), which amends that certain Credit
Agreement (as previously amended, the "Existing Credit Agreement" and, as
amended by the Fifth Amendment, the "Credit Agreement"; the credit facilities
thereunder, the "Senior Secured Credit Facilities"), dated as of March 3, 2020,
by and among the Company, as a guarantor, the Borrower, Citizens Bank, N.A., as
administrative agent (in such capacity, the "Administrative Agent"), a lender,
issuing lender, swingline lender, joint lead arranger and bookrunner, Santander
Bank, National Association, as a lender, joint lead arranger and bookrunner, and
the other lenders party thereto (each, together with Citizens Bank, N.A. and
Santander Bank, National Association, referred to individually as a "Lender",
and collectively, the "Lenders"). The purpose of the Fifth Amendment is to
provide the Company with additional flexibility under the Senior Secured Credit
Facilities in order to continue its investment in the IP Optical Networks
segment and to address the continued global uncertainty including the supply
chain disruptions.
The Fifth Amendment reduces the minimum Consolidated Fixed Charge Coverage Ratio
(as defined in the Credit Agreement) for the remainder of 2022 and increases the
maximum Consolidated Net Leverage Ratio (as defined in the Credit Agreement)
until at least the end of the fiscal quarter of the Company ending June 30,
2023, each of which the Borrower must comply with on a quarterly basis.
Following a Junior Debt Incurrence Event (as defined below), in addition to
complying with a minimum Consolidated Fixed Charge Coverage Ratio and a maximum
Consolidated Net Leverage Ratio, the Borrower must also comply on a quarterly
basis with a maximum Consolidated Senior Net Leverage Ratio (as defined in the
Credit Agreement).
The Fifth Amendment increases the maximum rate at which loans incurred under the
Senior Secured Credit Facilities bear interest if the Company's Consolidated Net
Leverage Ratio for any fiscal quarter of the Company is greater than 4.50x .
Specifically, pursuant to the Fifth Amendment, loans incurred under the Senior
Secured Credit Facilities bear interest, at the Borrower's option, at either the
LIBOR rate plus a margin ranging from 1.50% to 4.50% per year, or the base rate
(the highest of the Federal Funds Effective Rate (as defined in the Credit
Agreement) plus 0.50%, or the prime rate announced from time to time in The Wall
Street Journal) plus a margin ranging from 0.50% to 3.50% per year (such margins
being referred to as the "Applicable Margin"). Prior to giving effect to the
Fifth Amendment, the maximum Applicable Margin was 3.50% with respect to loans
accruing interest at the LIBOR rate, and 2.50%, with respect to loans accruing
interest at the base rate. Consistent with the Existing Credit Agreement, the
Applicable Margin varies depending on the Company's Consolidated Net Leverage
Ratio. The Fifth Amendment does not change the zero percent floor applicable to
the LIBOR Rate and the base rate.
Pursuant to the Fifth Amendment, the Borrower may incur junior secured or
unsecured debt in an amount not less than $50,000,000, subject to certain
conditions set forth in the Fifth Amendment, including that 50% of the aggregate
amount of such incurred debt (net of certain costs, fees and other amounts) must
be applied to prepay the Senior Secured Credit Facilities (the incurrence of any
such junior secured or unsecured debt is referred to herein as a "Junior Debt
Incurrence Event"). The Fifth Amendment prohibits the Borrower from making
certain acquisitions, certain repurchases of equity, certain dividends and
certain other restricted payments, and certain investments, in each case, until
after the delivery (or deemed delivery upon filing of such financial statements
with the Securities and Exchange Commission) to the Administrative Agent of the
Company's audited financial statements for the Company's fiscal year ending
December 31, 2022. Following a Junior Debt Incurrence Event, certain leverage
ratio-based covenant exceptions (including exceptions allowing the incurrence of
additional indebtedness) in the Credit Agreement are adjusted, such that in
order to utilize such exceptions, the Borrower must comply with a Consolidated
Net Leverage Ratio requirement and with a Consolidated Senior Net Leverage Ratio
requirement.
Pursuant to the Fifth Amendment, the commitment fee applied to the daily amount
of unused portions of the commitments under the Credit Agreement ranges from
0.20% to 0.50% per year, depending on the Company's Consolidated Net Leverage
Ratio. Prior to giving effect to the Fifth Amendment, the maximum such
commitment fee was 0.35% per year.
The foregoing description of the Fifth Amendment is qualified in its entirety by
reference to the Fifth Amendment, a copy of which is being filed as Exhibit 10.1
hereto and is incorporated herein by reference.
Forward-Looking Statements
This Current Report on Form 8-K contains "forward-looking statements" within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are
subject to a number of risks and uncertainties. All statements other than
statements of historical facts contained in this Current Report on Form 8-K,
including without limitation statements regarding the Company's plans relating
to and expected benefits of the Fifth Amendment, are forward-looking statements.
Without limiting the foregoing, the words "believes", "estimates", "expects",
"expectations", "intends", "may", "plans", "projects" and other similar
language, are intended to identify forward-looking statements.
Forward-looking statements are based on the Company's current expectations and
assumptions regarding its business, the economy and other future conditions.
Because forward-looking statements relate to the future, they are subject to
inherent uncertainties, risks and changes in circumstances that are difficult to
predict. Actual results may differ materially from those contemplated in these
forward-looking statements due to various risks, uncertainties and other
important factors, including, among others, risks related to supply chain
disruptions resulting from component availability; the effects of geopolitical
instabilities and disputes, including between Russia and Ukraine and the impact
of sanctions imposed as a result thereof; risks related to the continuing
COVID-19 pandemic, including delays in customer deployments as a result of rises
in cases; risks that the Company will not realize the anticipated benefits from
the acquisition of ECI Telecom Group Ltd. or investments in its IP Optical
Networks segment; risks that the Company will not realize the estimated cost
savings and/or anticipated benefits from its strategic restructuring; the impact
of restructuring and cost-containment activities; declines in the value of the
Company's ongoing investment in American Virtual Cloud Technologies, the
purchaser of the Company's Kandy Communications business; unpredictable
fluctuations in quarterly revenue and operating results; risks related to the
terms of the Company's credit agreement including compliance with the financial
covenants; risks related to cybersecurity and data intrusion; failure to compete
successfully against telecommunications equipment and networking companies;
failure to grow the Company's customer base or generate recurring business from
existing customers; credit risks; the timing of customer purchasing decisions
and the Company's recognition of revenues; macroeconomic conditions; litigation;
market acceptance of the Company's products and services; rapid technological
and market change; the ability to protect Company intellectual property rights
and obtain necessary licenses; the ability to maintain partner, reseller,
distribution and vendor support and supply relationships; the potential for
defects in the Company's products; increases in tariffs, trade restrictions or
taxes on the Company's products; and currency fluctuations.
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These factors are not intended to be an all-encompassing list of risks and
uncertainties that may affect the Company's business and results from
operations. Additional information regarding these and other factors can be
found in the Company's reports filed with the Securities and Exchange
Commission, including, without limitation, its Form 10-K for the year ended
December 31, 2021. In providing forward-looking statements, the Company
expressly disclaims any obligation to update these statements publicly or
otherwise, whether as a result of new information, future events or otherwise,
except as required by law.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Description
10.1 Fifth Amendment to Credit Agreement, dated June 30, 2022 among
Ribbon Communications Operating Company, Inc., as the borrower, the
guarantors party thereto, the financial institutions party thereto as
lenders, and Citizens Bank, N.A., as administrative agent.
Cover Page Interactive Data File (embedded within the Inline XBRL
104 document).
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