Item
1.01. Entry into a Material Definitive Agreement.
Supplemental
Indenture for the 2028 Senior Secured Notes
On
February 13, 2020 (the “Issue Date”), AG Issuer, LLC (“AG Escrow Issuer”) issued $500 million
in aggregate principal amount of 6.25% Senior Secured Notes due 2028 (the “2028 Senior Secured Notes”). The
2028 Senior Secured Notes were issued pursuant to the indenture, dated as of the Issue Date (the “Initial Indenture”),
by and between AG Escrow Issuer and Wilmington Trust, National Association, as trustee (the “Trustee”) and
as notes collateral agent (the “Notes Collateral Agent”).
On
the Effective Date and upon consummation of the Merger, AG Escrow Issuer was merged with and into Advisor Group. In connection
therewith, the Company and certain of its subsidiaries (together, the “Guarantors”) entered into a supplemental
indenture, dated the Effective Date (the “2028 Senior Secured Notes Supplemental Indenture,” and together with
the Initial Indenture, the “2028 Senior Secured Notes Indenture”), pursuant to which the Guarantors have agreed
to guarantee all of Advisor Group’s obligations under the 2028 Senior Secured Notes Indenture and the 2028 Senior Secured
Notes.
The
2028 Senior Secured Notes bear interest at 6.25% and mature on March 1, 2028. Interest on the 2028 Senior Secured Notes is payable
semi-annually on March 1 and September 1 of each year, beginning on September 1, 2020.
Prior
to March 1, 2023, the 2028 Senior Secured Notes may be redeemed at any time and from time to time, in whole or in part, at a redemption
price equal to 100% of the principal amount of the 2028 Senior Secured Notes, plus accrued and unpaid interest, if any, to, but
not including, the redemption date, plus a “make-whole.” In addition, at any time prior to March 1, 2023, up to 40%
of the aggregate principal amount of the 2028 Senior Secured Notes may be redeemed with an amount not to exceed the net cash proceeds
from certain equity offerings at a redemption price of 103% of the principal amount of the 2028 Senior Secured Notes to be redeemed
plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, until March 1, 2023, up to 10%
of the original aggregate principal amount of the 2028 Senior Secured Notes may be redeemed during the period beginning on the
issue date and ending on February 28, 2021, and on each subsequent twelve month period beginning March 1, 2021 and March 1, 2022,
at a redemption price of 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the
redemption date.
On
and after March 1, 2023, the 2028 Senior Secured Notes may be redeemed at any time and from time to time at the applicable redemption
prices set forth in the 2028 Senior Secured Notes Indenture plus accrued and unpaid interest, if any, to, but excluding, the redemption
date.
Upon
the consummation of the Merger, the 2028 Senior Secured Notes and related guarantees will be secured on a first lien basis by
substantially all assets of Advisor Group, certain of its subsidiaries and the Guarantors (other than certain excluded assets),
which assets secure the Guarantors’ obligations under the Senior Secured Credit Facilities (as defined below) on a pari
passu basis, subject to permitted liens. The 2028 Senior Secured Notes Indenture contains restrictive covenants that limit, among
other things, the ability of the Guarantors to incur or guarantee additional indebtedness or issue disqualified stock or certain
preferred stock; pay dividends and make other distributions or repurchase stock; make certain investments; create or incur liens;
sell assets; enter into certain transactions with the Guarantors; merge, consolidate or transfer or sell all or substantially
all of the Guarantors’ assets; and designate restricted subsidiaries as unrestricted subsidiaries. These covenants are subject
to a number of important limitations and exceptions. The 2028 Senior Secured Notes Indenture also contains customary events of
default which would permit the holders of the 2028 Senior Secured Notes to declare the 2028 Senior Secured Notes to be immediately
due and payable if not cured within applicable grace periods.
Supplemental
Indenture for the 2027 Senior Notes
On
the Effective Date and upon consummation of the Merger, the Guarantors entered into a supplemental indenture, dated the Effective
Date (the “2027 Senior Notes Supplemental Indenture”), pursuant to which the Guarantors agreed to guarantee
all of Advisor Group’s obligations under the indenture, dated as of August 1, 2019, among Advisor Group, the guarantor parties
thereto from time to time, and the Trustee (as supplemented, the “2027 Senior Notes Indenture”), and Advisor
Group’s 10.75% senior unsecured notes due 2027 (the “2027 Senior Notes”), which, as of the Effective
Date, had an outstanding aggregate principal amount of approximately $350 million.
The
2027 Senior Notes will mature on August 1, 2027. Interest on the 2027 Senior Notes accrues at a rate of 10.75% per annum and is
payable semi-annually in arrears on February 1 and August 1 of each year. At any time prior to August 1, 2022, the 2027 Senior
Notes may be redeemed, in whole or in part, at a redemption price equal to 100% of the principal amount of such notes plus a make-whole
premium, together with accrued but unpaid interest to, but excluding, the redemption date. At any time on or after August 1, 2022,
some or all of the 2027 Senior Notes may be redeemed at any time and from time to time at the applicable redemption prices set
forth in the 2027 Senior Notes Indenture plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
At
any time prior to August 1, 2022, the 2027 Senior Notes may be redeemed with the net cash proceeds received from certain equity
offerings at a redemption price equal to 110.750% of the principal amount of such notes, plus accrued but unpaid interest to,
but excluding, the redemption date.
The
2027 Senior Notes contain restrictive covenants and other terms that are substantially similar to the 2028 Senior Secured Notes.
Senior
Secured Credit Facilities
On
the Effective Date, the Company and certain of its subsidiaries, as guarantors, entered into a joinder agreement to Advisor Group’s
credit agreement with, inter alios, the several lending institutions from time to time party thereto and UBS AG, Stamford
Branch, as administrative agent, governing the senior secured credit facilities (the “Senior Secured Credit Facilities”).
On the Effective Date and upon consummation of the Merger, the Senior Secured Credit Facilities consisted of (i) a seven year
$1,500 million senior secured Term Loan B facility (the “Term Loan Facility”) and (ii) a $325 million senior
secured revolving credit facility (the “Revolving Credit Facility”).
Advisor
Group is the borrower under the Senior Secured Credit Facilities. The Revolving Credit Facility includes sub-facilities for letters
of credit and short-term borrowings referred to as swing line borrowings. In addition, the credit agreement governing the Senior
Secured Credit Facilities provides that Advisor Group has the right at any time, subject to customary conditions, to solicit existing
or prospective lenders to provide incremental term loans or incremental revolving credit commitments. The lenders under the Senior
Secured Credit Facilities are not obligated to provide any such incremental loans or commitments, and any such addition of or
increase in loans will be subject to certain customary conditions precedent and other provisions.
Borrowings
under the Senior Secured Credit Facilities bear interest, at the option of Advisor Group, at a rate per annum equal to certain
margins over either (a) a base rate determined by reference to the highest of (i) the U.S. prime rate published in The Wall Street
Journal from time to time, (ii) the federal funds effective rate, plus 1/2 of 1% and (iii) one month LIBOR rate plus 1.00% or
(b) a LIBOR rate determined by reference to the London interbank offered rate, adjusted for statutory reserve requirements, subject
to a zero percent floor.
During
the continuation of any payment event of default, the interest rate will be, with respect to overdue principal, the applicable
interest rate, plus 2.00% per annum and, with respect to any other overdue amount, the interest rate applicable to base rate loans,
plus 2.00% per annum (other than to defaulting lenders).
A
per annum fee equal to the applicable spread over the LIBOR rate under the Revolving Credit Facility in effect from time to time
will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Credit Facility, payable in arrears
at the end of each quarter after the closing of the Senior Secured Credit Facilities and upon termination of the Revolving Credit
Facility. In addition, Advisor Group will pay (a) a fronting fee of 0.125% on the aggregate face amount of outstanding letters
of credit under the Revolving Credit Facility, payable in arrears at the end of each quarter after the closing of the Senior Secured
Credit Facilities and upon termination of the Revolving Credit Facility and (b) such issuing bank’s customary and reasonable
issuance and administration fees.
Advisor
Group will pay to the lenders under the Revolving Credit Facility (other than defaulting lenders) a commitment fee of 0.50% per
annum on the undrawn portion (for this purpose, disregarding swingline loans as a utilization of the Revolving Credit Facility)
of the commitments in respect of the Revolving Credit Facility, subject to two step-downs of 12.5 basis points based on meeting
specified first lien net leverage ratios. All commitment fees are payable quarterly in arrears upon the termination of the commitments.
The
Senior Secured Credit Facilities contain customary mandatory prepayments, including with respect to excess cash flow (solely with
respect to the Term Loan Facility), asset sale and casualty proceeds and proceeds from certain incurrences of indebtedness.
Advisor
Group may voluntarily repay outstanding loans under the Senior Secured Credit Facilities at any time without premium or penalty,
other than reimbursement of redeployment costs with respect to LIBOR loans. Any voluntary prepayment, refinancing or repricing
of the term loans under the Term Loan Facility in connection with certain repricing transactions that occur prior to the six-month
anniversary of the closing of the Senior Secured Credit Facilities shall be subject to a prepayment premium of 1.00% of the principal
amount of the term loans so prepaid, refinanced or repriced (subject to customary exceptions).
The
Term Loan Facility will mature on August 1, 2026 and will amortize in equal quarterly installments in an aggregate annual amount
equal to 1.00% of its original principal amount (subject to reduction in connection with debt prepayments and debt buybacks),
with the balance payable on the final maturity date. The Revolving Credit Facility will terminate on the day that is five years
after the closing of the Senior Secured Credit Facilities.
All
obligations of Advisor Group under the Senior Secured Credit Facilities and, at the option of Advisor Group, the obligations of
Advisor Group or any of its restricted subsidiaries under certain hedge agreements and cash management arrangements provided by
any lender party to the Senior Secured Credit Facilities or any of its affiliates and certain other persons, are unconditionally
guaranteed by AG Parent Corp. (“Holdings”) and certain of Advisor Group’s existing and subsequently acquired
or organized direct or indirect material wholly owned U.S. restricted subsidiaries with customary exceptions including, among
other things, for broker dealer subsidiaries and where providing such guarantees is not permitted by law, regulation or contract
or would result in adverse tax consequences (other than de minimis) to Holdings, Advisor Group or any of their subsidiaries or
any direct or indirect parent thereof.
All
obligations of Advisor Group under the Senior Secured Credit Facilities and, at the option of Advisor Group, certain hedge agreements
and cash management arrangements provided by any lender party to the Senior Secured Credit Facilities or any of its affiliates
and certain other persons, and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions,
by (i) a perfected pledge of all the capital stock of each direct, wholly owned material restricted subsidiary held by Advisor
Group, Holdings and each subsidiary guarantor (limited to 65% of the capital stock of certain subsidiaries and subject to customary
exceptions) and (ii) a perfected security interest in substantially all other tangible and intangible assets of Advisor Group,
Holdings and the subsidiary guarantors (subject to customary exceptions).
The
Senior Secured Credit Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions,
Advisor Group’s ability and the ability of the restricted subsidiaries of Advisor Group to: incur additional indebtedness
and guarantee certain indebtedness; create or incur liens; engage in mergers or consolidations; sell, transfer or otherwise dispose
of assets; pay dividends and distributions or repurchase capital stock; prepay, redeem or repurchase certain indebtedness; make
investments, loans and advances; and enter into certain transactions with affiliates. The Revolving Credit Facility contains a
springing financial covenant requiring compliance with a certain ratio of first lien net indebtedness to consolidated EBITDA.
Breaches of this financial covenant are subject to customary “equity cure” rights.
The
Senior Secured Credit Facilities limit Holdings’ activities to being a passive holding company and contain certain customary
affirmative covenants and events of default for facilities of this type, including relating to a change of control.
If
an event of default occurs, the lenders under the Senior Secured Credit Facilities (or, in the case of the springing financial
covenant under the Revolving Credit Facility, the lenders under the Revolving Credit Facility) are entitled to take various actions,
including the acceleration of amounts due under the Senior Secured Credit Facilities (or the Revolving Credit Facility in the
case of such springing financial covenant) and all actions permitted to be taken by secured creditors.