Item 1.01. Entry into a Material Definitive Agreement.
On October 7, 2020, Allegiant Travel Company (the “Company”) issued $150 million in aggregate principal amount of its 8.500% Senior Secured Notes due 2024 (the “Notes”) pursuant to an Indenture, dated as of October 7, 2020 (the “Indenture”), among the Company, the Guarantors (as defined below) and Wilmington Trust, National Association, as trustee (in such capacity, the “Trustee”) and collateral agent (the “Collateral Agent”). The Notes are guaranteed (the “Note Guarantees”) by the subsidiaries of the Company party to the Indenture as guarantors (the “Guarantors”).
The Notes bear interest at a rate of 8.500% per annum, payable in cash on February 1 and August 1 of each year, beginning February 1, 2021. The Notes will mature on February 5, 2024.
The Notes and Note Guarantees are secured by first priority security interests in, subject to permitted liens, substantially all of the property and assets of the Company and the Guarantors (excluding aircraft, aircraft engines and certain other assets) (the “Collateral”). The Collateral also secures the Company’s outstanding loan under the Credit and Guaranty Agreement, dated as of February 5, 2019, among the Company, as borrower, the subsidiaries of the Company party thereto, as guarantors, the lenders party thereto, and Barclays Bank PLC, as administrative agent, syndication agent and lead arranger (as amended, restated, supplemented, modified, renewed, refunded, replaced or refinanced from time to time) (the “Credit and Guaranty Agreement”), on a pari passu basis.
The Notes are the Company’s senior secured obligations, ranking equally in right of payment with all of its existing and future senior indebtedness and senior to its existing and future subordinated indebtedness. The Notes will be effectively senior to the Company’s existing and future unsecured indebtedness to the extent of the Company’s assets securing the Notes. Each Note Guarantee is such Guarantor’s senior secured obligations, ranking equally in right of payment with all of its existing and future senior indebtedness and senior to its existing and future subordinated indebtedness. Each Note Guarantee is effectively senior to the applicable Guarantor’s existing and future unsecured indebtedness to the extent of the Guarantor’s assets securing the Guarantee. The Notes and the Note Guarantees will be structurally subordinated to the existing and future indebtedness of the Company’s non-guarantor subsidiaries.
Prior to August 5, 2023, the Company may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon to the redemption date and a “make-whole” premium to be calculated as described in the Indenture. On or after August 5, 2023, the Company may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon to the redemption date and without any premium.
Upon the occurrence of certain changes in control of the Company described in the Indenture, the Company will be required to offer to repurchase all of the Notes at a purchase price in cash equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest thereon to the date of purchase.
In addition, upon the occurrence of certain asset sales or recovery events described in the Indenture, if the Company has not used the net proceeds therefrom to prepay certain permitted debt or reinvest in assets as prescribed by the Indenture within the time periods set forth therein, the Company will be required to offer to repurchase the maximum aggregate principal amount of the Notes and other First Lien Debt (as defined in the Indenture) that may be purchased with the excess proceeds of such asset sales or recovery events at a repurchase price in cash equal to 100% of the principal amount of the Notes and any such other First Lien Debt, plus accrued and unpaid interest thereon to the date of purchase.
The Indenture contains certain covenants that limit the ability of the Company and the Guarantors to, among other things: (i) make restricted payments; (ii) incur indebtedness or issue preferred stock; (iii) create or incur certain liens; (iv) dispose of loyalty program or brand intellectual property collateral; (v) merge, consolidate or sell all or substantially all assets and (vi) enter into certain transactions with affiliates.
The Indenture also requires the Company to comply with certain affirmative covenants, including to deliver a quarterly compliance certificate to the Trustee demonstrating that the Company is in compliance with its covenant under the Credit and Guaranty Agreement that, at the end of each calendar quarter, it will maintain a maximum total leverage ratio of 5.00:1.00 and a minimum aggregate amount of liquidity of $300,000,000 (or the then applicable total leverage ratio or minimum aggregate amount of liquidity as may be amended under the Credit and Guaranty Agreement from time to time). If the Company fails to deliver such quarterly compliance certificate within the prescribed time period or the certificate demonstrates that the total leverage ratio is more than the ratio permitted under the Credit and Guaranty Agreement or the liquidity is less than the minimum amount required under the Credit and Guaranty Agreement at the time, then the Company will be required to pay
additional interest on all outstanding Notes in an amount equal to 2.0% per annum of the principal amount of such Notes until the Company delivers to the Trustee an officer’s certificate demonstrating compliance with the aforementioned maximum total leverage ratio and minimum aggregate liquidity requirement. In addition, the Company is required to comply with certain specified financial reporting requirements and to maintain the Collateral.
Subject to certain materiality thresholds, qualifications, exceptions, “baskets” and grace and cure periods, the Indenture also includes certain customary events of default, including payment defaults, covenant defaults, cross-defaults to indebtedness under the Credit and Guaranty Agreement and bankruptcy events. Upon the occurrence of an event of default other than bankruptcy events of default, the Trustee or the holders of at least 25% in principal amount of the Notes then outstanding may declare the principal amount of and premium, if any, on the Notes and any accrued and unpaid interest on the Notes to be due and payable immediately. Upon the occurrence of bankruptcy events of default, the principal amount of and premium, if any, on the Notes and any accrued and unpaid interest on the Notes will automatically be due and payable immediately.
If the Notes are accelerated or otherwise become due prior to their maturity date, in each case, in respect of any event of default, the amount that shall then be due and payable by the Company shall be equal to: (x) 100% of the principal amount of the Notes then outstanding plus a “make-whole” premium in effect on the date of such acceleration to be calculated as described in the Indenture, plus (y) accrued and unpaid interest to the date of such acceleration.
In connection with the issuance of the Notes, the Collateral Agent has entered into a First Lien Intercreditor Agreement, dated October 7, 2020, with Barclays Bank PLC, as Authorized Representative for the secured parties under the Credit and Guaranty Agreement (the “Intercreditor Agreement”). Among other things, the Intercreditor Agreement provides for the priorities and other relative rights among the holders of the Notes and the holders of the obligations of the Company and the Guarantors under the Credit and Guaranty Agreement.
The foregoing summary of the Indenture, the Notes and the Intercreditor Agreement is not complete and is qualified in its entirety by reference to the full and complete text of the Indenture, the Notes and Intercreditor Agreement, copies of which are attached as Exhibits 4.1, 4.2 and 4.3 to this Current Report on Form 8-K and incorporated herein by reference.