ITEM 1.01 Entry into a Material Definitive Agreement.
Non-Recourse U.S. SPV Facility
On April 8, 2020, Curo Receivables Finance II, LLC, a newly-created, bankruptcy-remote special purpose vehicle (the “U.S. SPV Borrower”) and an indirect wholly-owned subsidiary of CURO Group Holdings Corp. (the “Company”), entered into a four-year revolving loan and security agreement by and among the U.S. SPV Borrower, Midtown Madison Management LLC, as administrative agent (the “Agent”), and Atalaya Asset Income Fund VI LP, as initial lender, that provides for $100.0 million of initial borrowing capacity and, subject to obtaining additional commitments thereunder, the ability to expand such capacity up to $200.0 million (“U.S. SPV Facility”).
The U.S. SPV Facility is secured by a first lien against all assets of the U.S. SPV Borrower. The lenders will make advances against the principal balance of the eligible installment, open-end and bank partner loans sold to the U.S. SPV Borrower. The initial advance rate is 65% and, subject to certain conditions, may increase to up to 90% beginning October 1, 2020. Interest accrues at an annual rate of one-month LIBOR plus (i) prior to the increase in commitments, 9.75% and (ii) from and after the increase in commitments, 5.75%. The U.S. SPV Borrower will pay the lenders additional interest if it does not borrow minimum specified percentages of the available commitments and a monthly 0.50% per annum commitment fee on the unused portion of the commitments. Advances under the U.S. SPV Facility will be subject to a 1.0% original issue discount against the maximum commitment. The U.S. SPV Facility may not be prepaid prior to April 8, 2021. Prepayments incur a fee equal to (a) prior to September 8, 2021, 3.0% of the aggregate commitments, (b) thereafter, until March 8, 2022, 2.0% of the aggregate commitments, and (c) thereafter, zero.
The U.S. SPV Facility contains various conditions to borrowing, covenants and various events of default, the occurrence of which could result in termination of the lenders’ commitments to lend and the acceleration of all obligations of the U.S. SPV Borrower. This facility matures in 2024.
Pursuant to the Indemnity Guaranty entered into by the Company on April 8, 2020 in connection with the U.S. SPV Facility, the Company and certain of its subsidiaries is providing the Agent and lenders with a limited guaranty and indemnification of (i) losses attributable to certain acts of the Company, certain of its affiliates and the U.S. SPV Borrower, including willful misrepresentation, fraud, misappropriation of funds and certain acts of bankruptcy with respect to the Company and such subsidiaries and (ii) the full amount of the indebtedness under the U.S. SPV Facility if the U.S. SPV Borrower files for bankruptcy or otherwise fails to comply with its covenants in a manner that adversely impacts its bankruptcy-remote nature.
In connection with the U.S. SPV Facility, Curo Receivables Holdings II, LLC (the “Intermediate SPV”) entered into a Loan Purchase Agreement (Tier I) with certain operating subsidiaries of the Company, and the U.S. SPV Borrower entered into a Loan Purchase Agreement (Tier II) (collectively, the “Purchase Agreements”), with the Intermediate SPV, pursuant to which such operating subsidiaries will sell to the Intermediate SPV, on a servicing-released basis, and the Intermediate SPV will sell to the U.S. SPV Borrower, certain eligible receivables and related rights and collections. Also, Curo Management LLC (“Curo Management”) entered into a Servicing Agreement (the “Servicing Agreement”) with the U.S. SPV Borrower pursuant to which Curo Management will service and collect the receivables owned by the U.S. SPV Borrower for the benefit of the U.S. SPV Borrower and the lenders.
The foregoing descriptions of the various agreements are not complete and are qualified in their entirety by reference to the full text of the agreements, which will be attached as exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.