| Item 1.01 |
Entry into a Material Definitive Agreement. |
New Secured Revolving Credit Facility.
On November 18, 2022, Universal Technical Institute, Inc., a Delaware corporation (the “Company”), as borrower, and certain of its subsidiaries (collectively with the Company, the “Loan Parties”), entered into a Credit Agreement (“Credit Agreement”) with Fifth Third Bank, a national banking association (the “Lender”). Under the Credit Agreement, the Company obtained a $100.0 million senior secured revolving credit facility (the “Facility”) for a term of three years, unless earlier terminated pursuant to the terms and conditions set forth in the Credit Agreement. The Facility also includes a $20.0 million sub facility that is available for letters of credit.
Interest and Amortization.
The Credit Agreement provides that the revolver will amortize on an interest-only basis during its term with principal able to be borrowed, re-paid and re-borrowed throughout the term of the Facility and with the outstanding principal due and payable at maturity. Advances made under the Facility will bear interest at a floating rate equal to, at the Company’s option, either (a) the Base Rate, which is a variable rate equal to the greater of: (i) 3.5%, or (ii) the rate that the lender publicly announces, publishes or designates from time to time as its index rate or prime rate, or any successor rate thereto, in effect at its principal office, or (b) the Tranche Rate, which is a variable rate equal to the greater of (i) 0%, or (ii) Term SOFR relating to quotations for one (1) or three (3) months, as selected by the Company or as otherwise set pursuant to the terms of the Credit Agreement, as applicable, plus, in the case of any Term SOFR loan, an adjustment equal to 0.10% if the interest period is one (1) month and 0.15% if the interest period is three (3) months. Interest in the case of Tranche Rate loans will be increased by an applicable margin that varies from 1.75% up to 2.25% based on the Company’s then-current total leverage ratio.
Covenants and Other Matters
The Company is subject to certain customary affirmative and negative covenants under the Credit Agreement for financing generally and for the Facility, including financial covenants such as total leverage ratio, a fixed charge coverage ratio, and a quick ratio. In addition, the Company is required to maintain a financial responsibility composite score of at least 1.4 as of the end of the fiscal year ending September 30, 2023 and of at least 1.5 as of the end of any fiscal year thereafter. Lastly, the Facility contains a “clean off” provision, under which the amount outstanding on the Facility may not exceed $20,000,000 for a single thirty (30) consecutive day period during the period commencing on the date of the initial draw under the Facility and ending on the date which falls twenty (20) months thereafter.
Guaranty and Security Agreement.
Concurrent with, and as a condition to, the Facility, the Loan Parties executed a Guaranty and Security Agreement for the benefit of the Lender (the “Guaranty and Security Agreement”), pursuant to which the Loan Parties (a) guaranteed the payment obligations of the Company under the Credit Agreement, and (b) secured the payment obligations of the Company with the assets of the Loan Parties (subject to certain exceptions).
The foregoing descriptions of the Credit Agreement and the Guaranty and Security Agreement do not purport to be complete and are qualified in their entirety by the full text of the Credit Agreement and the Guaranty and Security Agreement, copies of which are filed as Exhibit 10.1 and Exhibit 10.2, respectively, hereto and are incorporated by reference herein.