Item 1.01. Entry into a Material Definitive Agreement.
On January 19, 2021 (the “Closing Date”), Affirm Holdings, Inc., a Delaware corporation (the “Company”), and Affirm, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (the “Borrower”), as borrower, entered into a Revolving Credit Agreement, dated as of January 19, 2021 (the “Credit Agreement”), with the lenders party thereto, and Morgan Stanley Senior Funding, Inc., as administrative agent, with an initial aggregate commitment of $185 million, maturing on January 19, 2024. On the Closing Date, no amounts were drawn under the Credit Agreement.
Proceeds of the borrowings under the Credit Agreement will be used for general corporate purposes of the Borrower and its subsidiaries in the ordinary course of business. Borrowings under the Credit Agreement are unsecured and will bear interest at a rate equal to, at the Borrower’s option, either (a) a Eurodollar rate determined by reference to adjusted LIBOR for the interest period, plus an applicable margin of 2.50% per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the rate last quoted by The Wall Street Journal as the U.S. prime rate, and (iii) the one-month adjusted LIBOR plus 1.0% per annum, in each case, plus an applicable margin of 1.50% per annum. In addition, the Credit Agreement requires the Borrower to pay a commitment fee of 0.35% per annum in respect of the unused commitments under the Credit Agreement.
The obligations of the Borrower under the Credit Agreement are presently guaranteed by the Company and certain domestic subsidiaries of the Borrower and are required to be guaranteed in the future by certain additional domestic subsidiaries of the Company.
The Credit Agreement contains events of default if either the cumulative default ratio for a given period or the three-month rolling average delinquent receivable ratio referred to therein exceed certain thresholds, and other customary events of default, including in the event of a change of control. The Credit Agreement also contains certain covenants and restrictions that limit the Company’s and its subsidiaries’ ability to, among other things: incur additional debt; create liens on certain assets; pay dividends on or make distributions in respect of their capital stock or make other restricted payments; consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; and enter into certain transactions with their affiliates.
The Credit Agreement also contains certain financial maintenance covenants that require the Company and its subsidiaries to not exceed a specified leverage ratio as of the last day of each fiscal quarter, to maintain a minimum tangible net worth as of the last day of each fiscal quarter, and to maintain a minimum level of unrestricted cash while any borrowings under the Credit Agreement are outstanding.
If the Company or the Borrower fail to perform their respective obligations under these and other covenants (after giving effect to any applicable grace period specified in the Credit Agreement), or should any event of default occur, the revolving loan commitments under the Credit Agreement may be terminated, and any outstanding borrowings, together with accrued interest, under the Credit Agreement could be declared immediately due and payable.
The foregoing is a summary is qualified in its entirety by reference to the full text of the Credit Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
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