Item
1.01
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Entry Into a Material Definitive Agreement
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On March 13, 2017, Alaska
Communications Systems Holdings, Inc. (Alaska Communications), as borrower, entered into a Credit Agreement with Alaska Communications Systems Group, Inc. (the Parent or the Company) and certain of the
Parents direct and indirect subsidiaries, as guarantors, ING Capital LLC, as Administrative Agent, and the lenders party thereto (the Credit Agreement) to provide debt financing in the form of a Revolving Facility in an
aggregate amount at any one time outstanding not to exceed $15,000,000, including a letter of credit subfacility and swingline subfacility with commitment limitations based on amounts drawn under the Revolving Facility (collectively, the
Revolving Facility), a term loan facility
(A-1)
in the aggregate amount not to exceed $120,000,000 (the Term
A-1
Facility) and term loan
facility
(A-2)
in the aggregate amount not to exceed $60,000,000 (the Term
A-2
Facility, and collectively with the Revolving Facility and Term
A-1
Facility, the Credit Facility).
As of March 13, 2017, the lenders became
committed to fund the Credit Facility upon Alaska Communications satisfying certain standard conditions precedent to disbursement of the loans. The Term
A-1
Facility and Term
A-2
Facility proceeds are to be used to refinance Alaska Communications outstanding $62 million first lien term loan facility and $25 million second lien term loan facility, finance the
purchase or repayment at maturity of the 6.250% convertible notes of the Parent having a due date of May 1, 2018 (the Convertible Notes) (including through payment relating to a previously announced tender offer for the
Convertible Notes expected to be launched in the near term (the Tender Offer)) and to pay related fees and expenses. Proceeds of the Revolving Facility will be used for working capital and other general corporate purposes. Proceeds of
the Term
A-1
Facility and Term
A-2
Facility in the principal amount of the Convertible Notes outstanding on the funding date that are not repaid or repurchased on the
funding date (currently $94,000,000) will be disbursed into and held in a full dominion account. Such proceeds will be released to purchase or repay principal of the Convertible Notes from time to time, subject to Alaska Communications satisfying
the disbursement conditions set forth in the Credit Agreement.
The Credit Facility also provides incremental term loans up to an
aggregate amount of $50,000,000, which may be borrowed by Alaska Communications subject to obtaining commitments of lenders. In certain cases, borrowing an incremental term loan may result in an increase to the interest rate of the Term
A-1
Facility and Term
A-2
Facility.
The final maturity date for
the Revolving Facility and Term
A-1
Facility is March 13, 2022, and Term
A-2
Facility is March 13, 2023. The terms and conditions of the Credit Facility
include the following:
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Amounts outstanding under the Revolving Facility and Term
A-1
Facility bear an interest rate of LIBOR plus 5%, and amounts outstanding under the Term
A-2
Facility bear an interest rate of LIBOR plus 7%, each with a LIBOR floor of 1%. At Alaska Communications discretion, an alternate base rate may be selected at a margin that is 1% lower than the counterpart
LIBOR margin;
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Principal payments are due quarterly commencing December 31, 2017. The Term
A-1
Facility begins amortization at the rate of 1.25% per quarter for approximately two years and
stepping up thereafter. The Term
A-2
Facility begins amortization at the rate of 0.25% per quarter for approximately three years and stepping up thereafter;
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Alaska Communications is required to maintain financial ratios including (a) a Net Total Leverage Ratio not to exceed 3.75:1.00, stepping down at various periods; and (b) Fixed Charge Coverage Ratio of not
less than 1.05:1.00, as such ratios are defined in the Credit Agreement;
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Repurchases of the Parents equity interests are subject to a $10,000,000 limitation, satisfying a minimum liquidity and cash-flow requirement and other customary conditions as described in the Credit Agreement.
Upon achieving certain Net Total Leverage Ratio targets, the Parent may make additional repurchases;
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Other customary covenants restricting the incurrence of debt, declaring dividends, making investments, dispositions, and entering into mergers and acquisitions;
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Upon funding the Credit Facility, a guarantee by the Parent and all wholly-owned subsidiaries; and
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Upon funding the Credit Facility, the Credit Facility will be secured by substantially all of the personal property and certain material real property owned by the Parent, Alaska Communications, and its wholly-owned
subsidiaries, excluding, among other things, certain federal and state licenses where a pledge is prohibited by applicable law or is permitted only with the consent of a governmental authority that has not been obtained.
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The Credit Facility also contains certain customary covenants and events of default, as well as,
in the event of an occurrence of an Event of Default, customary remedies for the lenders, including the acceleration of any amounts outstanding under the Credit Facility. Additionally, the Credit Facility includes certain customary
conditions that must be met for Alaska Communications to borrow under the Credit Facility from time to time.
Certain parties to the
Credit Agreement, including ING Capital LLC and certain of the lenders, are parties to Alaska Communications current credit facilities, have in the past performed, and may in the future perform, investment banking, financial advisory, lending,
or commercial banking services, or other services for Alaska Communications and the Parent and its subsidiaries, for which they receive, have received, and may in the future receive, compensation and expense reimbursement.
The foregoing description of the Credit Facility is only a summary and does not purport to be complete. A copy of the Credit Agreement is
attached hereto as Exhibit 10.1 and incorporated herein by reference.