Item 1.01.
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Entry into a Material Definitive Agreement.
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On April 13, 2017 (the Closing Date),
Installed Building Products, Inc., a Delaware corporation (the Company), as borrower, entered into a term loan credit agreement (the Term Loan Agreement) with the lenders from time to time party thereto, Royal Bank of Canada
as term administrative agent and RBC Capital Markets, UBS Securities LLC and Jefferies Finance LLC as joint lead arrangers and joint bookrunners. The Term Loan Agreement, subject to the terms and conditions set forth therein, provides for a new
seven-year $300,000,000 term loan facility (the Term Loan).
On the Closing Date, the Company, as borrower, also entered into an asset-based
lending credit agreement (the ABL Credit Agreement and together with the Term Loan Agreement, the Senior Secured Credit Agreements) with the subsidiary guarantors from time to time party thereto, the financial institutions
from time to time party thereto, and SunTrust Bank, as issuing bank, swing bank and administrative agent, with SunTrust Robinson Humphrey, Inc. as left lead arranger and bookrunner. The ABL Credit Agreement provides for a revolving credit facility
of up to approximately $100,000,000 and up to $50,000,000 for the issuance of letters of credit (the ABL Revolver), which may be reduced or increased pursuant to the ABL Credit Agreement. The borrowing base for the ABL Revolver, which
determines availability under the facility, is based on a percentage of the value of certain of assets comprising the ABL Priority Collateral (as defined below).
Proceeds from the Senior Secured Credit Facilities were used to repay in full all amounts outstanding under the Credit and Security Agreement, dated
February 29, 2016 (the Credit and Security Agreement), by and among the Company, the lenders party thereto and KeyBank National Association, as joint lead arranger, sole book runner, administrative agent, swing line lender and
issuing lender. The Company also intends to use the Senior Secured Credit Facilities to fund ongoing operating and working capital needs and other general corporate purposes, and for certain fees and expenses associated with the closing of the
Senior Secured Credit Facilities.
Maturity, Amortization and Prepayment
The Term Loan amortizes in quarterly principal payments of $750,000 starting on September 30, 2017, with any remaining unpaid balances due on
April 15, 2024, which is the maturity date. Loans incurred under the ABL Revolver will have a final maturity of April 13, 2022.
Subject to
certain exceptions, the Term Loan will be subject to mandatory
pre-payments
equal to (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries
(other than with respect to certain permitted indebtedness); (ii) 100% of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to customary
reinvestment provisions and certain other expenses; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of excess cash flow of the Company and its restricted subsidiaries in excess of $5,000,000,
subject to customary exceptions and limitations.
Security and Guarantees
All of the obligations under the Senior Secured Credit Facilities will be guaranteed by all of the existing and future restricted subsidiaries of the Company
(the Guarantors).
All obligations under the Senior Secured Credit Facilities, and the guarantees of those obligations, will be secured by
substantially all of the assets of the Company and the guarantors subject to certain exceptions and permitted liens, including (i) with respect to the Term Loan, a first-priority security interest in such assets that constitute Term Loan
Priority Collateral and a second-priority security interest in such assets that constitute ABL Priority Collateral and (ii) with respect to the ABL Revolver, a first-priority security interest in such assets that constitute ABL Priority
Collateral and a second-priority security interest in such assets that constitute Term Loan Priority Collateral.
ABL Priority Collateral
includes substantially all presently owned and after-acquired accounts, inventory, rights of an unpaid vendor with respect to inventory, deposit accounts, commodity accounts, securities accounts and lock boxes, investment property, cash and cash
equivalents, and instruments and chattel paper and general intangibles, books and records, supporting obligations and documents and related letters of credit, commercial tort claims or other claims related to and proceeds of each of the foregoing.
Term Loan Priority Collateral includes all assets that are not ABL Priority Collateral.
Interest Rates
Loans under the Senior Secured Credit
Facilities will bear interest based on, at the Companys election, either the base rate or the Eurodollar rate plus, in each case, an applicable margin (the Applicable Margin). The Applicable Margin in respect of
loans under (i) the Term Loan Agreement will be (A) 3.00% in the case of Eurodollar rate loans and (B) 2.00% in the case of base rate loans, and (ii) the ABL Facility will be (A) 1.25%,
1.50% or 1.75% in the case of Eurodollar rate loans (based on a measure of availability under the ABL Facility) and (B) 0.25%, 0.50% or 0.75% in the case of base rate loans (based on a measure of availability under the ABL Facility).
In addition, the Company will pay a closing fee of 1.25% of the Term Loan amount and customary commitment fees and letter of credit fees under the ABL Credit
Agreement. The commitment fees will vary based upon a measure of the Companys utilization under the ABL Revolver.
Covenants
The Senior Secured Credit Facilities each contain a number of customary affirmative and negative covenants that, among other things, limit or restrict the
ability of the Company and the Guarantors to: incur indebtedness; incur liens; engage in mergers or other fundamental changes; sell certain property or assets; pay dividends or other distributions; make acquisitions, investments, guarantees, loans
and advances; prepay certain indebtedness; change the nature of their business; engage in certain transactions with affiliates; and incur restrictions on contractual obligations limiting interactions between the Company and its subsidiaries or limit
actions in relation to the Senior Secured Credit Facilities.
The ABL Credit Agreement also contains a financial covenant requiring the satisfaction of a
minimum fixed charge coverage ratio of 1.00 to 1.00 in the event that the Company does not meet a minimum measure of availability under the ABL Revolver.
Events of Default
The Senior Secured Credit Agreements
contains customary events of default, subject to certain grace periods, thresholds and materiality qualifiers. Such events of default include, without limitation:
non-payment
of obligations; the material
inaccuracy of any representations or warranties; failure to perform or observe covenants; a default related to other material debt that could result in the acceleration of that debt; certain events of bankruptcy or insolvency; judgments for the
payment of money in excess of $50,000,000 in the aggregate that remains unpaid or unstayed and undischarged for a period of 60 consecutive days; and a change of control of the Company. The occurrence and continuance of an event of default could
result in, among other things, acceleration of amounts owing under the Senior Secured Credit Agreements and termination of the Senior Secured Credit Agreements.
Under the Term Loan Agreement, if upon the occurrence and during the continuance of certain events of default, any principal of or interest on any loan under
the Term Loan Agreement or any fee or other amount payable by the Company is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount will bear interest at a rate per annum equal to (i) in the case of
overdue principal of any loan under the Term Loan Agreement, 2.00% per annum plus the rate otherwise applicable to such loan, or (ii) in the case of any other amount, 2.00% per annum plus interest rate for base rate loans as described above.
Under the ABL Credit Agreement, during an event of default, interest on the outstanding and overdue obligations arising under the ABL Credit Agreement
and the related loan documents may, at the administrative agents election, and shall, at the request of the Majority Lenders (as defined in the ABL Credit Agreement), accrue at a simple per annum interest rate equal to, with respect to all
outstanding obligations under the ABL Credit Agreement, the sum of (i) the applicable interest rate basis, if any, with respect to the applicable obligation, plus (ii) the Applicable Margin for such interest rate basis, plus (iii) 2.00%
(the ABL Default Rate); provided, however, that the ABL Default Rate will automatically deemed to be invoked at all times with respect to overdue obligations under the ABL Credit Agreement and the related loan documents that have been
accelerated or deemed accelerated under the ABL Credit Agreement.
The foregoing descriptions of the material terms and conditions of the Senior Secured
Credit Facilities do not purport to be complete and are subject to and qualified in their entirety by the full text of the Term Loan Agreement, the ABL Credit Agreement, copies of which are attached hereto as Exhibits 10.1 and 10.2, respectively,
and incorporated herein by reference, and the ABL/Term Loan Intercreditor Agreement, the Term Collateral Agreement, the ABL Security Agreement and the Term Guarantee Agreement, each dated as of the Closing Date, which are attached hereto as Exhibits
10.3, 10.4, 10.5 and 10.6, respectively, and incorporated herein by reference.