ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Indenture and Securities
On May 31, 2018, Carriage Services, Inc. (the
Company
) completed the issuance of $325 million in aggregate
principal amount of 6.625% Senior Notes due 2026 (the
Notes
) and related guarantees by the Subsidiary Guarantors (as defined below) (the
Guarantees
and, together with the Notes, the
Securities
) in a private offering (the
Private Offering
) under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the
Securities Act
).
The Company used approximately $291.4 million of the net proceeds, before expenses, of approximately $320.1 million for the sale of the
Notes, to repay its existing indebtedness under its existing secured credit facility. The Company intends to use the remainder of such net proceeds for general corporate purposes, including acquisitions.
The Securities were issued under an indenture, dated as of March 31, 2018 (the
Indenture
), among the Company,
certain of the Companys existing subsidiaries (collectively, the
Subsidiary Guarantors
), as guarantors, and Wilmington Trust, National Association., as trustee (
Collateral Trustee
).
The Notes will bear interest at an annual rate of 6.625%. Interest is payable semiannually in arrears on June 1 and December 1 of
each year, beginning on December 1, 2018, to holders of record on each May 15 and November 15 preceding an interest payment date. The Notes mature on June 1, 2026, unless earlier redeemed or purchased. The Notes are unsecured,
senior obligations of the Company. The Notes are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by each of the Subsidiary Guarantors.
The Company may redeem all or part of the Notes at any time prior to June 1, 2021 at a redemption price equal to 100% of the principal
amount of Notes redeemed, plus a make whole premium, and accrued and unpaid interest, if any, to the date of redemption. The Company has the right to redeem the Notes at any time on or after June 1, 2021 at the redemption prices
described in the Indenture, plus accrued and unpaid interest, if any, to the date of redemption. Additionally, at any time before June 1, 2021, the Company may redeem up to 40% of the aggregate principal amount of the Notes issued with an
amount equal to the net proceeds of certain equity offerings, at a price equal to 106.625% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the date of redemption; provided that (1) at least 60% of the
aggregate principal amount of the Notes (including any additional Notes) originally issued under the Indenture remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company); and (2) each such
redemption must occur within 180 days of the date of the closing of each such equity offering.
If a change of control occurs,
holders of the Notes will have the option to require the Company to purchase for cash all or a portion of their Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest. In addition, if the Company makes
certain asset sales and does not reinvest the proceeds thereof or use such proceeds to repay certain debt, it will be required to use the proceeds of such asset sales to make an offer to purchase the Notes at a price equal to 100% of the principal
amount of the Notes, plus accrued and unpaid interest.
The Indenture contains restrictive covenants limiting the ability of the Company
and its Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions,
purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to the Company, consolidate, merge, sell or otherwise dispose of all or substantially
all assets, or engage in transactions with affiliates. The Indenture also contains customary events of default.
A copy of the Indenture
is attached as Exhibit 4.1 to this Current Report on Form
8-K
and is hereby incorporated by reference herein. The form of the Notes (included as Exhibit A of the Indenture filed as Exhibit 4.1 hereto) is filed
as Exhibit 4.2 to this Current Report on Form
8-K
and is hereby incorporated by reference herein. The descriptions of the material terms of the Indenture and the Securities are qualified in their entirety by
reference to such exhibits.
New Credit Facility
On May 31, 2018, in connection with the issuance of the Securities, the Company entered into a new $150 million senior secured
revolving credit facility (the
New Credit Facility
) with the Credit Facility Guarantors (as defined below), the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent,
(
BofA
). At closing, the Company had no outstanding borrowings under the New Credit Facility and $148 million of availability after giving effect to the $2.0 million of letters of credit previously issued under the
Former Credit Agreement (as defined below) and that were deemed issued under (and remain outstanding under) the New Credit Facility.
The
New Credit Facility includes an accordion feature allowing for future increases in the facility size by an additional amount of up to $75 million. The New Credit Facility matures on May 31, 2023. Interest will accrue on amounts outstanding
under the New Credit Facility based on the Companys Total Leverage Ratio (as defined in the New Credit Facility) in accordance with the following pricing grid:
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Applicable
Rate
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Pricing Level
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Total
Leverage Ratio
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Eurodollar
Rate /Letter of Credit
Fees
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Base
Rate
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1
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< 3.50 : 1.00
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1.625
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%
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0.625
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%
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2
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< 4.25 : 1.00 but
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³
3.50 : 1.00
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1.750
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%
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0.750
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%
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3
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< 5.00 : 1.00 but
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³
4.25 : 1.00
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1.875
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%
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0.875
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%
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4
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³
5.00 : 1.00
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2.000
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%
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1.000
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%
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The Companys obligations under the New Credit Facility are unconditionally guaranteed on a joint and
several basis by the same subsidiaries which guarantee the Notes and certain of the Companys subsequently acquired or organized domestic subsidiaries (collectively, the
Credit Facility Guarantors
).
The New Credit Facility is secured by a first-priority perfected security interest in and lien on substantially all of the Companys
personal property assets and those of the Credit Facility Guarantors, and will include provisions which require the Company and such subsidiaries, upon the occurrence of an event of default under the New Credit Facility, to grant additional liens on
real property assets accounting for no less than 50% of the Companys and the Credit Facility Guarantors funeral operations.
The New Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of
proceeds, payment of taxes and other obligations, continuation of the Companys business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.
In addition, the New Credit Facility also contains customary negative covenant, including, but not limited to, covenants that, among other
things, restrict (subject to certain exceptions) the ability of the Company and the Credit Facility Guarantors to incur indebtedness, grant liens, make investments, engage in acquisitions, mergers or consolidations, and pay dividends and other
restricted payments, and the following financial covenants: a Total Leverage Ratio (as defined in the New Credit Facility) not to exceed 5.50 to 1.00, and a Fixed Charge Coverage Ratio of not less than 1.20 to 1.00 as of the end of any period of
four consecutive fiscal quarters. The financial covenants will be calculated for the Company and its subsidiaries on a consolidated basis.
The foregoing description of the New Credit Facility is qualified in its entirety by reference to the New Credit Facility, a copy of which is
attached hereto as Exhibit 10.1, and incorporated by reference herein.