GNRC Generac Holding Inc

 

 

On June 29, 2022 (the “Third Restatement Date”), Generac Power Systems, Inc. (“Generac”), a wholly owned subsidiary of Generac Holdings Inc. (the “Company”), entered into a Third Amendment (the “Third Amendment”), among Generac, the Company (for the limited purposes set forth therein), Generac Acquisition Corp. (“Holdings”), certain domestic subsidiaries of Generac, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent. The Third Amendment amends and restates the Credit Agreement (as amended and/or restated, supplemented, or otherwise modified from time to time prior to the Third Restatement Date, the “Existing Term Loan Credit Agreement”; the Existing Term Loan Credit Agreement as amended by the Third Amendment, the “Amended and Restated Credit Agreement”), dated as of February 9, 2012, by and among, Holdings, Generac, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties party thereto from time to time pursuant to which Generac entered into a term loan credit facility (the “Existing Term Loan B Facility”) under which Generac has outstanding term loans in an aggregate principal amount, as of the Third Restatement Date (prior to giving effect to the Term Loan B Prepayment (as defined below)) of $780 million (such term loans, the “Existing Term B Loans”). After giving effect to the Term Loan B Prepayment, an aggregate principal amount equal to $530 million of Existing Term B Loans remains outstanding on the Third Restatement Date.

 

The Third Amendment amends and restates the Existing Term Loan Credit Agreement to, among other things, establish a new term loan facility in an aggregate principal amount of $750 million (the “2022 Tranche A Term Loan Facility”), establish a new revolving facility in an aggregate principal amount of $1.25 billion (the “2022 Revolving Facility” and together with the 2022 Tranche A Term Loan Facility, the “2022 New Facilities”), and replace all LIBOR provisions applicable to the Existing Term Loan B Facility with the customary SOFR provisions as set forth in the Amended and Restated Credit Agreement. Subject to the terms of the Amended and Restated Credit Agreement, the maturity date of the 2022 New Facilities is June 29, 2027 (the “Maturity Date”); provided, however, to the extent the Existing Term Loan B Facility remains outstanding, the Maturity Date springs to a date that is 90 days prior to the maturity date for the Existing Term Loan B Facility, which is December 13, 2026 (the “Springing Maturity Date”). The Third Amendment further states that the 2022 Revolving Facility provides for a swingline commitment in an aggregate principal amount of $25 million, a letter of credit sublimit in an aggregate principal amount of $100 million, and revolving borrowings in US Dollars, Euros, Sterling and such other currency as may be approved by the Administrative Agent. The proceeds of the Loans (under and as defined in the Amended and Restated Credit Agreement) will be used to finance the working capital needs, and for general corporate purposes, of Generac and its subsidiaries, for the ABL Prepayment (as defined below), the Term Loan B Prepayment, and the payment of fees and expenses under any Loan Document (including, without limitation, the Third Amendment).

 

 

Borrowings under the 2022 New Facilities will bear interest at a per annum rate based upon Adjusted Term SOFR or SONIA, as applicable, plus an applicable margin of (x) 1.50% for the period from the Third Restatement Date to the date that is three Business Days after the date on which financial statements are delivered to the lenders pursuant to the Amended and Restated Credit Agreement with respect to the second full fiscal quarter ended after the Third Restatement Date, and (y) between 1.25% and 1.75%, in each case subject to adjustments based upon the total leverage ratio of Generac and its subsidiaries. Borrowings under the Existing Term Loan B Facility will bear interest at a per annum rate based upon Adjusted Term SOFR, as applicable, plus an applicable margin of 1.75%. The 2022 Revolving Facility incurs an unused commitment fee which shall accrue at a rate of 0.20% on the daily unused amount of the 2022 Revolving Facility.

 

 

The 2022 Tranche A Term Loan Facility will be fully drawn on June 29, 2022 (the proceeds of the 2022 Tranche A Term Loan Facility, the “Term A Loans”) and will be repayable in quarterly installments in an amount equal to, with respect to the fiscal quarters ending June 30, 2022 through and including June 30, 2023, 0.0%, with respect to the fiscal quarters ending September 30, 2023 through and including June 30, 2024, 2.5%, with respect to the fiscal quarters ending September 30, 2024 through and including June 30, 2025, 5.0%, with respect to the fiscal quarters ending September 30, 2025 through and including June 30, 2026, 7.5%, and with respect to the fiscal quarters ending September 30, 2026 through and including March 31, 2027, 10.0% of the original principal amount of the Term A Loans, with the remaining principal balance due and payable on the Maturity Date or the Springing Maturity Date, as applicable.

 

 

The Existing Term B Loans will be repayable in equal quarterly installments in an amount equal to 0.25% of the original principal amount of the Existing Term B Loans (such quarterly installments to begin on July 1, 2022), with the remaining principal balance due and payable on December 13, 2026. On the Third Restatement Date and in accordance with the Amended and Restated Credit Agreement, the Term Loan B Prepayment was applied by Generac to the remaining amortization payments in the direct order of maturity.

 

 

The Term A Loans and the Existing Term B Loans may be repaid in whole or in part, without premium or penalty, subject to prior written notice to the Administrative Agent. In addition, the Term A Loans and the Existing Term B Loans are subject to customary mandatory prepayments with respect to asset sales, and solely with respect to the Existing Term B Loans, excess cash flow (in the event the secured leverage ratio is greater than or equal to 3.75:1.00).

 

 

In addition, the Amended and Restated Credit Agreement contains the following financial covenants with respect to the 2022 New Facilities, in each case tested on a quarterly basis beginning with the fiscal quarter ending June 30, 2022: (i) total leverage ratio shall not exceed 3.75:1.00; or, in the event Generac or its restricted subsidiaries have paid cash consideration in excess of $350 million with respect to a Permitted Business Acquisition (as defined in the Amended and Restated Credit Agreement), 4.25:1.00 for each of the four fiscal quarters following the consummation of the Permitted Business Acquisition (including the fiscal quarter in which the Permitted Business Acquisition occurred); and (ii) the interest coverage ratio shall be at least 3.00:1.00.

 

As was the case in respect of the Existing Term Loan Credit Agreement, under the Amended and Restated Credit Agreement, as of the Third Restatement Date, the Existing Term Loan B Facility remains secured by substantially all of the assets of the Loan Parties (under and as defined in the Amended and Restated Credit Agreement) and guaranteed by the Guarantors (under and as defined in the Amended and Restated Credit Agreement), which includes, certain wholly-owned domestic subsidiaries of Generac. As of the Third Restatement Date, the 2022 New Facilities are secured and guaranteed on a pari passu basis with the Existing Term Loan B Facility. The Amended and Restated Credit Agreement and the other Loan Documents contain customary exceptions and exemptions in respect of both security and guarantee requirements, in each case, as more fully set forth therein.

 

 

In conjunction with the closing of the Third Amendment, Generac prepaid (in addition to certain interest and fees) the total existing outstanding principal balance of the ABL revolving loans under that certain Third Amended and Restated Credit Agreement (as amended and/or restated, supplemented, or otherwise modified from time to time, the “ABL Credit Agreement”), among, Generac, Holdings, Generac Holdings UK Limited, certain domestic subsidiaries of Generac, the lenders party thereto, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as syndication agent, and Wells Fargo Bank, National Association, as Documentation Agent (such prepayment, the “ABL Prepayment”). For the avoidance of doubt, the ABL Credit Agreement and all obligations thereunder are terminated upon the making of the ABL Prepayment.

 

Additionally, also in conjunction with the closing of the Third Amendment, Generac used $250 million of the Term A Loans to repay a portion of the Existing Term B Loans (such prepayment, the “Term Loan B Prepayment”).

 

 

The Third Amendment and Amended and Restated Credit Agreement are attached hereto as Exhibit 10.1 and incorporated herein by reference. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to such exhibit.