Item 1.01.
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Entry into a Material Definitive Agreement.
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Offering
On November 22, 2017, H&E Equipment Services, Inc. (the Company) completed its previously announced offering (the Offering) of
$200 million aggregate principal amount of 5.625% senior notes due 2025 (the New Notes). The New Notes were issued as additional notes under an indenture (the Indenture) dated as of August 24, 2017 pursuant to
which the Company previously issued $750,000,000 of 5.625% senior notes due 2025 (the Existing Notes, and together with the New Notes, the Notes). The New Notes have identical terms to, rank equally with and form a part of a
single class of securities with the Existing Notes.
The New Notes were sold in a private placement pursuant to a purchase agreement, dated
November 20, 2017, by and among the Company, the subsidiaries of the Company (the Guarantors), Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC (the Initial
Purchasers). The New Notes were resold by the Initial Purchasers to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933 (the Securities Act) and to
non-U.S.
persons pursuant to Regulation S of the Securities Act. The Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements.
The Company will use the proceeds from the Offering to repay indebtedness outstanding under its
existing ABL credit facility, to fund potential acquisitions in connection with its ongoing strategy of acquiring rental companies to complement its existing business and footprint, for general corporate purposes and to pay fees and expenses in
connection with the Offering. Certain terms of the Notes and the Indenture are as follow:
The Notes will mature on September 1, 2025 and will accrue
interest at the rate of 5.625% per year. Interest on the Notes will be payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2018. The Company may redeem some or all of the Notes at any time prior to
September 1, 2020 by paying a make-whole premium, plus accrued and unpaid interest and Additional Interest (as defined in the Indenture), if any, to the date of redemption. At any time prior to September 1, 2020, the Company
may use the net proceeds of certain equity offerings to redeem up to 40% of the principal amount of the Notes at a redemption price equal to 105.625% of their principal amount, plus accrued and unpaid interest and Additional Interest, if any, to the
redemption date; provided that at least 60% of the aggregate principal amount of such Notes originally issued remains outstanding immediately following such redemption and such redemption occurs within 90 days of such equity offering. Subsequent to
September 1, 2020, the Notes may be redeemed pursuant to a declining schedule of redemption prices set forth in the Indenture.
The New Notes are
senior unsecured obligations of the Company and will rank equally in right of payment to all of the Companys existing and future senior indebtedness and will rank senior to any of the Companys subordinated indebtedness. The New Notes
will be unconditionally guaranteed on a senior unsecured basis by all of the Companys current and future significant domestic subsidiaries (the Guarantors). In addition, the New Notes will be effectively subordinated to all of the
Companys and the guarantors existing and future secured indebtedness, including the Companys existing ABL credit facility, to the extent of the assets securing such indebtedness, and will be structurally subordinated to all of the
liabilities and preferred stock of any of the Companys subsidiaries that do not guarantee the New Notes.
The Indenture contains covenants that
limit the ability of the Company and the ability of its restricted subsidiaries to, among other things: incur additional debt; pay dividends and make distributions; make investments; repurchase stock; create liens; enter into transactions with
affiliates; merge or consolidate; and transfer and sell assets. Certain of these covenants will cease to apply to the Notes for so long as the Notes have investment grade ratings from both Moodys Investors Service, Inc. and Standard &
Poors Financial Services LLC. If an event of default, as specified in the Indenture, shall occur and be continuing, either the trustee or the holders of a specified percentage of the Notes may accelerate the maturity of all the Notes. The
covenants, events of default and acceleration rights described in this paragraph are subject to important exceptions and qualifications, which are described in the Indenture.
If the Company experiences a Change of Control (as defined in the Indenture), the holders of the Notes will have
the right to require the Company to repurchase their Notes at a repurchase price equal to 101% of their principal amount, plus accrued and unpaid interest and Additional Interest, if any, to the date of repurchase. Furthermore, if the Company sells
assets, the Company may be required to repurchase the Notes at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest and Additional Interest, if any, to the date of repurchase.
A copy of the Indenture, which includes the form of the New Notes, is attached as Exhibit 4.1 to the Companys Current Report on Form
8-K
filed on August 24, 2017 and is incorporated herein by reference. The description set forth above of certain of the terms of the Indenture and the New Notes does not purport to be complete and is qualified
in its entirety by the full text of the Indenture and the New Notes.
Registration Rights Agreement
Under a registration rights agreement with the Initial Purchasers and the Guarantors, the Company and the Guarantors have agreed to (i) use all
commercially reasonable efforts to file, no later than February 20, 2018, a registration statement (the Exchange Offer Registration Statement) with the U.S. Securities and Exchange Commission (the SEC) with respect to a
registered offer to exchange the New Notes for new notes (the Exchange Notes) of the Company having terms substantially identical in all material respects to the New Notes (except that the Exchange Notes will not contain any transfer
restrictions) (the Exchange Offer), (ii) use all commercially reasonable efforts to have the Exchange Offer Registration Statement declared effective by the SEC on or prior to May 21, 2018, (iii) commence the Exchange Offer;
and (iv) use all commercially reasonable efforts to issue, on or prior to thirty (30) business days (or longer, if required by the federal securities laws) after the Exchange Offer Registration Statement is declared effective by the SEC,
Exchange Notes and related guarantees in exchange for all New Notes and guarantees tendered in the Exchange Offer.
In addition, the Company has agreed,
in some circumstances, to file a shelf registration statement that would allow some or all of the New Notes to be offered to the public. If the Company does not comply with its obligations under the registration rights agreement, it
will be required to pay Additional Interest to holders of the New Notes.
The description set forth above of certain of the terms of the registration
rights agreement does not purport to be complete and is qualified in its entirety by the full text of the registration rights agreement, which is attached hereto as Exhibit 4.1 and is incorporated herein by reference.