| Item 1.01 | Entry into a Material Definitive Agreement |
On May 4, 2021 (the “Closing Date”), Insulet Corporation (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders and other parties from time to time party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, which provides for senior secured financing of up to $560 million, consisting of a term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $500 million and a revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Facilities”) in an aggregate principal amount of up to $60 million, including a letter of credit sub-facility of up to $10 million.
Proceeds of loans borrowed and letters of credit issued under the Senior Facilities will be used for working capital and other general corporate purposes of the Company and its subsidiaries, including to retire indebtedness and/or to fund investments. The Company borrowed the full amount of the Term Loan Facility on the Closing Date, and as of the Closing Date, the Revolving Credit Facility was undrawn.
The Senior Facilities are guaranteed by each of the Company’s wholly owned domestic subsidiaries, and are secured by substantially all assets of the Company and of each subsidiary guarantor, in each case subject to certain exceptions.
Borrowings under the Senior Facilities bear interest at a rate per annum equal to, at the Company’s option, either (a) a LIBO rate, subject to a 0.50% floor for the Term Loan Facility and a 0.00% floor for the Revolving Credit Facility, or (b) a base rate, in each case, plus an applicable margin of, in the case of borrowings under the Term Loan Facility, 3.25% for LIBOR loans and 2.25% for base rate loans and, in the case of borrowings under the Revolving Credit Facility, initially, 3.25% for LIBOR loans and 2.25% for base rate loans. The applicable margin for borrowings under the Revolving Credit Facility varies depending on the Company’s adjusted total leverage ratio, as defined in the Credit Agreement. The Company is also required to pay a commitment fee initially equal to 0.50% per annum to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder. The commitment fee under the Revolving Credit Facility varies depending on the Company’s adjusted total leverage ratio.
The Term Loan Facility matures on the seven year anniversary of the Closing Date and amortizes in equal quarterly installments of 0.25% of the initial principal amount, starting with the first full fiscal quarter after the Closing Date. The Revolving Credit Facility matures on the three year anniversary of the Closing Date. In addition, the Company is required to prepay outstanding loans under the Term Loan Facility, subject to certain exceptions, with up to 50% of the Company’s annual excess cash flow, as defined in the Credit Agreement, and 100% of the net cash proceeds of certain recovery events and non-ordinary course asset sales.
The Company may generally prepay outstanding loans under the Senior Facilities at any time, without prepayment premium or penalty, subject to customary “breakage” costs with respect to LIBOR loans. Prepayments of the Term Loan Facility in connection with certain “repricing events” resulting in a lower yield occurring at any time during the first six months after the Closing Date must be accompanied by a 1.00% prepayment premium.
The Revolving Credit Facility requires that the Company maintain a financial covenant leverage ratio, as defined in the Credit Agreement, of no greater than 6.50 to 1.00 as of the last day of each fiscal quarter for which the aggregate amount of revolving loans, swingline loans and letters of credit (subject to certain exclusions) outstanding under the Revolving Credit Facility exceeds 35% of the aggregate commitments outstanding thereunder, subject to certain step-ups in connection with certain material acquisitions, commencing with the first full fiscal quarter after the Closing Date.
The Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company and its restricted subsidiaries, among other things and subject to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions, and pay dividends and make other restricted payments.
