Item 1.01 Entry into a Material Definitive Agreement.
On September 30, 2020, Varex Imaging Corporation (the "Company") completed its
previously announced private offering of $300 million aggregate principal amount
of its 7.875% Senior Secured Notes due 2027 (the "2027 Notes") in a private
placement to qualified institutional buyers under Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act"), and to persons outside the
United States pursuant to Regulation S under the Securities Act. Concurrently
with the issuance of the 2027 Notes, the Company entered into a senior secured
asset-based revolving credit agreement providing for an asset-based facility
(the "ABL Credit Facility") in an initial aggregate principal amount of up to
$100 million. The Company used approximately $265.5 million of the net proceeds
from the offering to pay in full all amounts outstanding the Credit Agreement,
dated as of May 1, 2017, by and among Company as Borrower, the Lenders referred
to therein, as Lenders, and Bank of America, N.A., as Administrative Agent,
Swingline Lender and Issuing Lender (the "Previous Credit Facility").
Indenture
The 2027 Notes were issued pursuant to an Indenture, dated as of September 30,
2020 (the "Indenture"), by and among the Company, the guarantors party thereto
(the "Guarantors"), and Wells Fargo Bank, National Association, a national
banking association, as trustee and as collateral agent.
Interest and maturity. The 2027 Notes mature on October 15, 2027 and bear
interest at a rate of 7.875% per annum. Interest will accrue from September 30,
2020 and will be payable semi-annually on April 15 and October 15 of each year,
commencing April 15, 2021.
Guarantees and security. The 2027 Notes will be guaranteed on a senior secured
basis, jointly and severally, by the Company's existing and future domestic
subsidiaries that guarantee or are borrowers under the ABL Credit Facility or
certain future pari passu secured indebtedness. Each guarantee of a Guarantor
will be pari passu in right of payment with such Guarantor's other senior
indebtedness, including its guarantees of the ABL Credit Facility, as
applicable, subject to certain collateral arrangements, will be senior in right
of payment to any of such Guarantor's subordinated indebtedness and will be
effectively senior to such Guarantor's senior unsecured indebtedness, to the
extent of the value of the collateral. The 2027 Notes and the guarantees will be
secured by a first priority lien on certain of the Company's and the Guarantors'
real property, equipment, capital stock and intellectual property, subject to
certain exceptions and permitted liens. The 2027 Notes and the guarantees will
also be secured by a second priority lien on the assets securing the ABL Credit
Agreement. The ABL Credit Facility will have a junior lien on assets securing
the 2027 Notes, excluding initially any real property. An intercreditor
agreement will govern how the collateral securing the respective debt
obligations will be treated among the secured parties.
Optional redemption. The Company may redeem some or all of the 2027 Notes at any
time on or after October 15, 2023, at the following redemption prices (expressed
as percentages of principal amount), plus accrued and unpaid interest, if any,
to, but excluding, the applicable date of redemption, if redeemed during the
12-month period beginning on October 15 of the following years: 2023 - 105.906%;
2024 - 103.938%; 2025 - 101.969%; and 2026 and thereafter - 100.000%.
2
At any time prior to October 15, 2023, the Company may redeem up to 30% of the
aggregate principal amount of the 2027 Notes issued under the Indenture
(including any additional notes) using the proceeds of certain equity offerings
at a redemption price equal to 107.875% of the principal amount thereof, plus
accrued and unpaid interest, if any, to, but excluding, the applicable date of
redemption. In addition, at any time prior to October 15, 2023, the Company may
redeem during each calendar year up to 10% of the aggregate principal amount of
the 2027 Notes at a redemption price equal to 103% of the aggregate principal
amount of notes to be redeemed, plus accrued and unpaid interest, if any, to,
but excluding the redemption date. At any time, and from time to time, prior to
October 15, 2023, the Company may redeem some or all of the 2027 Notes at a
price equal to 100% of the principal amount of such 2027 Notes, plus accrued and
unpaid interest, if any, to, but excluding, the date of redemption, plus a
"make-whole" premium. If the Company sells certain of its assets that are
collateral and does not use the proceeds to repay certain indebtedness or to
invest in replacement collateral, or if the Company experiences specific kinds
of changes of control, the Company must offer to purchase the 2027 Notes.
Covenants. The Indenture contains covenants that limit the Company's ability and
the ability of the Company's restricted subsidiaries to, among other things: (i)
grant or incur liens on the collateral; (ii) incur, assume or guarantee
additional indebtedness; (iii) enter into sale and lease-back transactions; (iv)
sell or otherwise dispose of assets that are collateral; and (v) make certain
restricted payments or other investments.
Events of default. The Indenture sets forth certain events of default after
which the 2027 Notes may be declared immediately due and payable and sets forth
certain types of bankruptcy or insolvency events of default involving the
Company or any of the Company's significant subsidiaries.
The above summary of the material terms of the 2027 Notes and the Indenture does
not purport to be complete and is qualified in its entirety by reference to the
. . .
Item 1.02 Termination of a Material Definitive Agreement.
On September 30, 2020, the Company paid off and terminated the Previous Credit
Facility. As previously reported on Form 10-Q for the quarter ended July 3,
2020 filed on August 14, 2020 ("Form 10-Q"), the Previous Credit Facility
contained financial covenants, including certain leverage ratio covenants. Based
on the Company's forecasts available as of July 3, 2020, it was probable that
the Company would be in violation of certain leverage ratio covenants contained
in the Previous Credit Facility within the twelve-month period following the
issuance of those financial statements. Failure to comply with the covenants, if
not amended or waived, would have resulted in an event of default under the
Previous Credit Agreement and the acceleration of the outstanding balance of the
loans thereunder and cross defaults and accelerations under other agreements. As
a result, the Company's Form 10-Q reported that these events and conditions
raised substantial doubt about the Company's ability to continue as a going
concern within the twelve-month period following the issuance of those financial
statements.
Because the Previous Credit Facility has been paid off and terminated, the
financial covenants contained in the Previous Credit Facility are no longer
applicable. Additionally, the 2027 Notes do not contain any financial covenants
and the ABL Credit Agreement's financial covenant is limited to when excess
availability falls below a specified threshold. As such, the specific events and
conditions related to a possible event of default under the Previous Credit
Facility which gave rise to the substantial doubt about the Company's ability to
continue as a going concern as disclosed in the Company's Form 10-Q have been
mitigated by the transactions described above.
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 above in Item 1.01 is incorporated by reference into
this Item 2.03.
Item 8.01 Other Events.
On October 1, 2020, the Company issued a press release announcing the closing of
the offering of the 2027 Notes and the ABL Credit Facility. A copy of the press
release is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
5
Exhibit No. Exhibit Description
99.1 Press Release dated October 1, 2020
Cover Page Interactive Data File (formatted in Inline XBRL and
104 contained in Exhibit 101)
6© Edgar Online, source Glimpses
VAREX IMAGING CORPORATION 
