Item 1.01. Entry into a Material Definitive Agreement.
Background
As previously reported in the Current Report on Form 8-K filed by Molina Healthcare, Inc. (the “Company”) with the Securities and Exchange Commission on December 7, 2017, the Company entered into a commitment letter (the “Commitment Letter”) with SunTrust Bank and SunTrust Robinson Humphrey, Inc. (“STRH” and, together with SunTrust Bank, the “Original Commitment Parties”), pursuant to which, subject to the terms and conditions set forth therein, the Original Commitment Parties committed to provide, among other things, a 364-day unsecured senior bridge facility in an aggregate principal amount of up to $550.0 million
(the “364-Day Bridge Facility”)
to be used to
(i) satisfy conversions of the Company’s 1.125% Cash Convertible Senior Notes due 2020 (the “1.125% Notes”), (ii) satisfy and/or refinance indebtedness incurred to satisfy conversions of the 1.125% Notes, (iii) repay or refinance the Company’s existing revolving credit facility and (iv) pay fees and expenses in connection with the foregoing (collectively, the “Transactions”).
Amended and Restated Commitment Letter
On January 2, 2018, the Company entered into an Amended and Restated Commitment Letter (the “Amended and Restated Commitment Letter”) with the Original Commitment Parties and the New Commitment Parties (as defined below and, together with the Original Commitment Parties, the “Commitment Parties”), which amends, supersedes and replaces in all respects the Commitment Letter. The Amended and Restated Commitment Letter amends and restates the Commitment Letter to, among other things, (a) add Barclays Bank PLC, MUFG (as defined in the Amended and Restated Commitment Letter), Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Morgan Stanley Senior Funding, Inc. (collectively, the “New Commitment Parties”) as Commitment Parties to the 364-Day Bridge Facility, (b) reflect that the Commitment Parties achieved a successful syndication of the 364-Day Bridge Facility and (c) allow the Company to use any remaining proceeds following the Transactions for general corporate purposes.
Bridge Credit Agreement
On January 2, 2018, the Company and the Guarantors (as defined below) entered into a Bridge Credit Agreement (the “Bridge Credit Agreement”) evidencing the 364-Day Bridge Facility with SunTrust Bank, Barclays Bank PLC, The Bank of Tokyo-
Mitsubishi UFJ, Ltd., Bank of America, N.A., and Morgan Stanley Senior Funding, Inc., as Lenders, and
SunTrust Bank, as Administrative Agent (the “Administrative Agent”). Pursuant to the Bridge Credit Agreement, the 364-Day Bridge Facility is available for use by the Company to fund the Transactions and, subject to the satisfaction of specified conditions therein, for general corporate purposes.
The 364-Day Bridge Facility matures on January 1, 2019 (the “Initial Maturity Date”) and, subject to the satisfaction of specified conditions therein, the Company may elect to extend twice the Initial Maturity Date by a period of six months each.
Borrowings under the 364-Day Bridge Facility will bear interest based, at the Company’s election, at a base rate or an adjusted LIBOR rate, plus in each case the applicable margin.
The base rate is the highest of (a) the rate which the Administrative Agent announces from time to time as its prime lending rate, as in effect from time to time, (b) the federal funds rate, as in effect from time to time, plus 0.50% per annum and (c) a rate per annum equal to adjusted LIBOR for a term of one month plus 1.0% per annum (any changes in such rates to be effective as of the date of any change in such rate). The adjusted LIBOR rate, with respect to each interest period for any loan that bears interest at a rate determined by adjusted LIBOR, is (a) the rate per annum equal to the London interbank offered rate for deposits in U.S. dollars appearing on Reuters screen page LIBOR 01 at approximately 11:00 a.m. (London time) two business days prior to the first day of such interest period, with a maturity comparable to such interest period, divided by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities (as defined in Regulation D of the Board of Governors of the Federal Reserve System), and notwithstanding the foregoing, has a floor of 1.00% per annum. In addition to interest payable on the principal amount of indebtedness from time to time under the Bridge Credit Agreement, the Company is required to pay fees to the Administrative Agent in the amount and at the time previously agreed upon in writing by the Company and the Administrative Agent.
The Company’s wholly-owned subsidiaries which guarantee the Company’s obligations under the indenture governing the Company’s 4.875% Senior Notes due 2025 (the “4.875% Notes Indenture”) and the Company’s existing revolving credit facility (the “Existing Revolving Credit Facility”) (
i.e.
, Molina Information Systems, LLC, Molina Pathways LLC and Pathways Health and Community Support LLC (the “Guarantors”)) have jointly and severally guaranteed the Company’s obligations under the Bridge Credit Agreement.
The Bridge Credit Agreement contains usual and customary (a) affirmative covenants for credit facilities of this type and substantially similar to those contained in the credit agreement governing the Existing Revolving Credit Facility, (b) negative covenants consistent with those contained in the 4.875% Notes Indenture and (c) events of default for credit facilities of this type and substantially similar to those contained in the 4.875% Notes Indenture.
The foregoing summaries of the Amended and Restated Commitment Letter and the Bridge Credit Agreement do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Amended and Restated Commitment Letter and the Bridge Credit Agreement, copies of which are being filed as Exhibits 10.1 and 10.2 hereto, respectively, and are incorporated herein by reference.