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Item 1.01
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Entry into a Material Definitive Agreement.
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Third Amendment to Credit Agreement
Square, Inc. (the “Company”) entered into the Third Amendment to Credit Agreement, dated as of January 28, 2021, among the Company, the lenders that are party thereto, and Goldman Sachs Bank USA, as administrative agent (the “Amendment”). The Amendment amends the Revolving Credit Agreement, dated May 1, 2020, among the Company, the lenders that are a party thereto, and Goldman Sachs Bank USA, as administrative agent (as amended, modified, or supplemented, the “Credit Agreement”).
The Amendment amends the Credit Agreement to increase the amount of indebtedness that the Company’s subsidiary, Square Capital, LLC (“Square Capital”), is permitted to incur pursuant to the Paycheck Protection Program Liquidity Facility authorized under Section 13(3) of the Federal Reserve Act of 1913 (the “PPPLF”) from an aggregate principal amount of up to $500 million to an aggregate principal amount of up to $1.0 billion. The PPPLF permits lenders such as Square Capital that have originated or purchased loans issued pursuant to 15 U.S.C 636(a)(36) (as added to the Small Business Act by Section 1102 of the CARES Act) (such loans, “PPP Loans”) to borrow from an applicable Federal Reserve Bank an amount up to 100% of the principal amount of the PPP Loans pledged as collateral for such borrowing.
The foregoing description of the Amendment is qualified in its entirety by reference to the Amendment attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Paycheck Protection Program Liquidity Facility Letter of Agreement
On January 29, 2021, Square Capital delivered a Paycheck Protection Program Liquidity Facility Letter of Agreement (as amended, modified, or supplemented, the “PPPLF Agreement” and together with the prior Paycheck Protection Program Liquidity Facility Letter of Agreement dated as of June 2, 2020, the “PPPLF Agreements”) to the Federal Reserve Bank of San Francisco pursuant to which Square Capital intends to request additional advances under the PPPLF. As of February 1, 2021, Square Capital held an aggregate principal amount of approximately $389 million of such advances and may in the future request advances in an aggregate principal amount of up to $1.0 billion (collectively, the “PPPLF Loans,” and each, a “PPPLF Loan”) pursuant to the PPPLF Agreements
PPPLF Loans advanced under the PPPLF Agreements must be secured by a pledge of PPP Loans originated or purchased by Square Capital. Each PPPLF Loan shall be in a principal amount equal to the aggregate principal amount of PPP Loans pledged by Square Capital to secure such PPPLF Loan. Advances under the PPPLF shall incur interest at a per annum rate of 0.35%.
The maturity date of any PPPLF Loan (the “Maturity Date”) will be the maturity date of the PPP Loan pledged to secure such PPPLF Loan. The Maturity Date of any PPPLF Loan will be accelerated on and to the extent of (i) the date of any loan forgiveness reimbursement by the Small Business Administration (the “SBA”) for any PPP Loan securing such PPPLF Loan; or (ii) the date of purchase by the SBA from Square Capital of any PPP Loan securing such PPPLF Loan to realize on the SBA’s guarantee of such PPP Loan. The Maturity Date of all PPPLF Loans shall be accelerated upon the occurrence of certain events of default by Square Capital, including but not limited to the failure to comply with a requirement of the PPPLF Agreements or any representation, warranty, or covenant of Square Capital under the PPPLF Agreements being inaccurate on or as of the date it is deemed to be made or on any date on which an PPPLF Loan remains outstanding.
PPPLF Loans may be prepaid in full or in part, without penalty. Square Capital shall prepay PPPLF Loans (i) on the date and to the extent of the payment by the SBA for the amount of covered loan forgiveness for any PPP Loan securing such PPPLF Loan; (ii) on the date of purchase by the SBA from Square Capital of a PPP Loan securing such PPPLF Loan to realize on the SBA’s guarantee of such PPP Loan; or (iii) on the date and to the extent a borrower under a PPP Loan repays or prepays such PPP Loan, in each case, so that the amount of any PPPLF Loans outstanding does not exceed the outstanding amount of PPP Loans pledged to secure such PPPLF Loans.