Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On May 8, 2023, i3 Verticals, LLC, a Delaware limited liability company (the “Borrower”), entered into that certain Credit Agreement (the “Credit Agreement”) with the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan”). The Credit Agreement replaces Borrower’s prior Amended and Restated Credit Agreement, dated as of May 9, 2019, among the Borrower, the guarantor and lender parties thereto and Bank of America, N.A., as administrative agent, as amended. The Credit Agreement provides for aggregate commitments of $450 million in the form of a senior secured revolving credit facility (the “Revolver”).
The Credit Agreement provides that the Borrower has the right to seek additional commitments to provide additional term loan facilities or additional revolving credit commitments in an aggregate principal amount up to, as of any date of determination, the sum of (i) the greater of $100 million and 100% of the Borrower’s consolidated EBITDA (as defined in the Credit Agreement) for the most recently completed four quarter period, plus (ii) the amount of certain prepayments of certain indebtedness, so long as, among other things, after giving pro forma effect to the incurrence of such additional borrowings and any related transactions, the Borrower’s consolidated interest coverage ratio (as defined in the Credit Agreement) would not be less than 3.00 to 1.0 and the Borrower’s consolidated total net leverage ratio (as defined in the Credit Agreement) would not exceed 5.00 to 1.0.
The provision of any such additional amounts under the additional term loan facilities or additional revolving credit commitments are subject to certain additional conditions and the receipt of certain additional commitments by existing or additional lenders. The lenders under the Credit Agreement are not under any obligation to provide any such additional term loan facilities or revolving credit commitments.
The proceeds of the Revolver, together with proceeds from any additional amounts under the additional term loan facilities or additional revolving credit commitments, may only be used by the Borrower to (i) finance working capital, capital expenditures and other lawful corporate purposes, (ii) finance permitted acquisitions (as defined in the Credit Agreement) and (iii) to refinance certain existing indebtedness.
Borrowings under the Revolver will be made, at the Borrower’s option, at the base rate or the Adjusted Term SOFR rate, plus, in each case, an applicable margin. The base rate is a fluctuating rate of interest per annum equal to the highest of (a) the greater of the federal funds rate or the overnight bank funding rate, plus ½ of 1%, (b) Wall Street Journal prime rate and (c) the Adjusted Term SOFR rate for an interest period of one month, plus 1%; provided, that the base rate shall not be less than 1% in any event. The Adjusted Term SOFR rate will be the rate of interest per annum equal to the Term SOFR rate (based upon an interest period of one, three or six months), plus 0.10%; provided, that the Adjusted Term SOFR rate shall not be less than 0% in any event. The applicable margin is based upon the Borrower’s consolidated total net leverage ratio (as defined in the Credit Agreement), as reflected in the schedule below:
| | | | | | | | | | | | | | |
| Consolidated Total Net Leverage Ratio | Commitment Fee | Letter of Credit Fee | Term Benchmark Loans | Base Rate Loans |
| > 3.00 to 1.0 | 0.30 | % | 3.00 | % | 3.00 | % | 2.00 | % |
| > 2.50 to 1.0 but < 3.00 to 1.0 | 0.25 | % | 2.50 | % | 2.50 | % | 1.50 | % |
| > 2.00 to 1.0 but < 2.50 to 1.0 | 0.20 | % | 2.25 | % | 2.25 | % | 1.25 | % |
| < 2.00 to 1.0 | 0.15 | % | 2.00 | % | 2.00 | % | 1.00 | % |
In addition to paying interest on outstanding principal under the Revolver, the Borrower will be required to pay a commitment fee equal to the product of between 0.15% and 0.30% (the applicable percentage depending on the Borrower’s consolidated total net leverage ratio as reflected in the schedule above) times the actual daily amount by which $450 million exceeds the total amount outstanding under the Revolver and available to be drawn under all outstanding letters of credit.
The Borrower will be permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the Credit Agreement, whether such amounts are issued under the Revolver or under the additional term loan facilities or additional revolving credit facilities, at any time without premium or penalty.
In addition, if the total amount borrowed under the Revolver exceeds $450 million at any time, the Credit Agreement requires the Borrower to prepay such excess outstanding amounts.
All obligations under the Credit Agreement are unconditionally guaranteed by the Company, and each of the Company’s existing and future direct and indirect material, wholly owned domestic subsidiaries, subject to certain exceptions. The obligations are secured by first-priority security interests in substantially all tangible and intangible assets of the Borrower, the Company and each subsidiary guarantor, in each case whether owned on the date of the initial borrowings or thereafter acquired.
The Credit Agreement places certain restrictions on the ability of the Borrower, the Company and their subsidiaries to, among other things, incur debt and liens; merge, consolidate or liquidate; dispose of assets; enter into hedging arrangements; make certain restricted payments; undertake transactions with affiliates; enter into sale-leaseback transactions; make certain investments; prepay or modify the terms of certain indebtedness; and modify the terms of certain organizational agreements.
The Credit Agreement contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, invalidity of loan documents and certain changes in control.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement and to the Security and Pledge Agreement, copies of which are attached to this Current Report on Form 8-K as Exhibit 10.1 and Exhibit 10.2, respectively and incorporated by reference herein.