Item 1.01
Entry into a Material Definitive Agreement.
On October 13, 2017, Computer Programs and Systems, Inc., a Delaware corporation (“
CPSI
”), as borrower, and certain subsidiaries of CPSI, as guarantors, entered into a Second Amendment (the “
Amendment
”) to CPSI’s existing Credit Agreement, dated as of January 8, 2016 (as amended, the “
Credit Agreement
”), with the lenders named therein and Regions Bank, as administrative agent and collateral agent (“
Regions
”), to refinance and decrease the current aggregate committed size of the credit facilities from $175 million to $162 million, which includes a $117 million term loan facility (the “
Amended Term Loan Facility
”) and a $45 million revolving credit facility (the “
Amended Revolving Credit Facility
” and, together with the Amended Term Loan Facility, the “
Amended Facilities
”). In addition to decreasing the aggregate size of the credit facilities, and as described in more detail below, the Amendment:
|
|
•
|
extends the maturity date of the Amended Facilities;
|
|
|
•
|
increases the maximum consolidated leverage ratio with which CPSI must comply;
|
|
|
•
|
decreases the interest rates for LIBOR rate loans and base rate loans and the letter of credit fee;
|
|
|
•
|
decreases the commitment fee; and
|
|
|
•
|
temporarily increases the percentage of excess cash flow (minus certain specified other payments) that must be used to prepay the Amended Facilities.
|
The proceeds of the Amended Facilities, including $30.16 million drawn under the Amended Revolving Credit Facility, were used to refinance in full the existing term loan and revolving credit facilities, fund fees and expenses associated with the Amended Facilities, and finance the ongoing working capital requirements and other general corporate purposes of CPSI and its subsidiaries permitted under the Credit Agreement. The Company expects the savings to be realized from the reduced pricing over the term of the Amended Facilities to cover the fees and expenses associated with the Amendment.
In addition to decreasing the aggregate size of the facilities, the maturity date of the Amended Facilities was extended to October 13, 2022 and the maximum consolidated leverage ratio (as defined in the Credit Agreement) with which CPSI must comply was increased to 3.95:1.00 through December 31, 2017 and 3.50:1.00 from January 1, 2018 and thereafter (from 3.50:1.00 for the period from October 1, 2016 through September 30, 2017, 3.00:1.00 for the period from October 1, 2017 through September 30, 2018, and 2.50:1.00 from October 1, 2018 and thereafter).
Each of the Amended Facilities continues to bear interest at a rate per annum equal to an applicable margin plus (1) the adjusted LIBOR rate for the relevant interest period, (2) an alternate base rate determined by reference to the greatest of (a) the prime lending rate of Regions, (b) the federal funds rate for the relevant interest period plus one half of one percent per annum and (c) the one month LIBOR rate plus one percent per annum, or (3) a combination of (1) and (2). The applicable margin range for LIBOR loans and the letter of credit fee will initially be 2.75%, and, following the date that CPSI certifies its consolidated leverage ratio for the third quarter of 2017, will range from 2.00% to 3.50% (adjusted downward from 2.25% to 3.50%). The applicable margin range for base rate loans will initially be 1.75%, and, following the date that CPSI certifies its consolidated leverage ratio for the third quarter of 2017, will range from 1.00% to 2.50% (adjusted downward from 1.25% to 2.50%), in each case based on CPSI’s consolidated leverage ratio.
In addition to paying interest on outstanding principal under the Credit Agreement, CPSI is required to pay a commitment fee in respect of the unutilized portion of the commitments under the Amended Revolving Credit Facility. The commitment fee rate will initially be 0.40% per annum, and, following the date that CPSI certifies its consolidated leverage ratio for the third quarter of 2017, will range from 0.25% to 0.50% (adjusted downward from 0.30% to 0.50%), depending upon CPSI’s consolidated leverage ratio. CPSI will also continue to pay customary agency fees.
Principal payments with respect to the Amended Term Loan Facility will be due on the last day of each fiscal quarter beginning December 31, 2017, with quarterly principal payments of approximately $1.46 million through September 30, 2019, approximately $2.19 million through September 30, 2021 and approximately $2.93 million
through September 30, 2022, with the remainder due at maturity on October 13, 2022 or such earlier date as the obligations under the Credit Agreement become due and payable pursuant to the terms of the Credit Agreement (the “
Maturity Date
”). Any principal outstanding under the Amended Revolving Credit Facility is due and payable on the Maturity Date.
The Credit Agreement requires CPSI to mandatorily prepay the Amended Facilities with the proceeds from certain sales, dispositions, issuances and incurrences of additional debt, and issuances and sales of equity securities, as well as with a percentage of CPSI’s excess cash flow. CPSI must prepay the Amended Facilities with (i) 75% of excess cash flow (minus certain specified other payments) following the date that CPSI certifies its consolidated leverage ratio for each of the fiscal years ending December 31, 2017 and December 31, 2018 and (ii) 50% of excess cash flow (minus certain specified other payments) following the date that CPSI certifies its consolidated leverage ratio for the fiscal years ending December 31, 2019 and thereafter. Prior to the Amendment, CPSI was required to prepay the credit facilities with 50% of excess cash flow (minus certain specified other payments) for each fiscal year. Beginning with any fiscal year ending on or after December 31, 2019, the mandatory prepayments for the Amended Facilities are subject to a step down to 0% of excess cash flow if CPSI’s consolidated leverage ratio is no greater than 2.50:1.00. Prior to the Amendment, this step down was available for any fiscal year if CPSI’s consolidated leverage ratio was no greater than 2.50:1.00.
“Amending the covenants and debt maturities for our credit facilities allows CPSI greater flexibility for future capital deployment decisions. To achieve this increased flexibility with an Amendment that could pay for itself through improved pricing is indicative of the confidence we believe our bank partners have in CPSI and the strength of our relationships with these key stakeholders,” said Matt J. Chambless, Chief Financial Officer of CPSI.
The foregoing summary of the Amendment is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.