The New Credit Facility allows an unlimited amount of defined “Investments,” which include certain intercompany transactions and acquisitions, provided the Company's pro forma leverage ratio is equal to or less than 2.75 to 1.00. If the Company's pro forma leverage ratio is greater than 2.75 to 1.00, such Investments are subject to certain limitations.
The New Credit Facility also allows an unlimited amount of defined "Restricted Payments," which include cash dividends and share repurchases, provided the Company's pro forma leverage ratio is equal to or less than 2.50 to 1.00. If the Company's pro forma leverage ratio is greater than 2.50 to 1.00, the New Credit Facility allows such payments up to $100 million per annum (subject to a cap of $300 million for the term of the facility, with up to $25 million of any unused amount of the $100 million per annum base available for use in the next succeeding calendar year).
Similar to the previous credit agreement, the borrowings under the New Credit Facility are secured by a lien on substantially all assets, including accounts receivable, inventory, machinery and equipment, and general intangibles (but excluding real estate, intellectual property registered or licensed solely for use in, or arising solely under the laws of, any country other than the United States, assets located solely outside of the United States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the United States, and pledges of stock in certain significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries.
The New Credit Facility is expected to provide greater operating flexibility, including with respect to intercompany funding and other transactions, and enable the Company to continue to streamline its complex subsidiary structure.
The New Credit Facility also continues to limit or restrict the Company and its subsidiaries, from, among other things, incurring indebtedness, incurring liens on its respective assets, making investments and acquisitions (assuming the Company’s pro forma leverage ratio is greater than 2.75 to 1.00), making asset sales, and paying cash dividends and making other restricted payments (assuming the Company's pro forma leverage ratio is greater than 2.50 to 1.00), and requires the Company to comply with other covenants, including the maintenance of specific financial ratios.
Similar to the previous credit agreement, the New Credit Facility also contains customary events of default, including, but not limited to, failure to pay principal or interest, failure to pay or default under other material debt, material misrepresentation or breach of warranty, violation of certain covenants, a change of control, the commencement of bankruptcy proceedings, the insolvency of Vishay or certain of its significant subsidiaries, and the rendering of a judgment in excess of $50 million against Vishay or its subsidiaries. Upon the occurrence of an event of default under the New Credit Facility, Vishay's obligations under the credit facility may be accelerated and the lending commitments under the credit facility may be terminated.
The description of the New Credit Facility set forth in this Item 1.01 is qualified in its entirety by reference to the text of the New Credit Facility, which is filed as Exhibit 10.1 to this report and incorporated by reference herein.
Item 1.02 – Termination of a Material Definitive Agreement
Effective June 5, 2019, in connection with the entry into the New Credit Facility described in Item 1.01 hereof, Vishay terminated its existing Credit Agreement dated as of December 1, 2010, as amended and restated as of August 8, 2013, as further amended and restated as of December 10, 2015, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other parties thereto, that was scheduled to mature on December 10, 2020.
Item 2.03 – Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Effective June 5, 2019, Vishay entered into the New Credit Facility more specifically described in Item 1.01 of this Current Report on Form 8-K, which description is incorporated by reference into this Item 2.03.
Item 8.01 – Other Events
On June 5, 2019, Vishay issued a press release regarding the matters described in Items 1.01 and 1.02 above.
A copy of the press release is attached hereto as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.
