| Item 1.01. | Entry into a Material Definitive Agreement |
On August 9, 2023, MarketAxess Holdings Inc. (the “Company”), as borrower, entered into a credit agreement (the “Credit Agreement”) with a syndicate of lenders and JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent. Pursuant to the Credit Agreement, the lenders have provided aggregate commitments totaling $750 million, consisting of a revolving credit facility (the “Credit Facility”), a $5 million letter of credit sub-limit for standby letters of credit and a $380 million sub-limit for swingline loans.
No funds are being borrowed by, and no letters of credit will be issued to, the Company at this time other than an existing standby letter of credit. Any future credit extensions under the Credit Agreement are subject to customary conditions precedent. The proceeds of any loans are expected to be used for general corporate purposes. The Credit Agreement replaces the Company’s existing credit agreement entered into on October 15, 2021, as amended on March 28, 2023, which had a maturity date of October 15, 2024. In connection with the entry into the Credit Agreement, the existing credit agreement has been terminated.
All borrowings under the Credit Facility will bear interest, at the Company’s option, at a rate per annum equal to (A) the sum of (i) the greatest of (a) the prime rate (last quoted by The Wall Street Journal as the prime rate in the U.S.), (b) the federal funds effective rate and the overnight bank funding rate plus 0.50% and (c) one-month adjusted Term SOFR (as defined in the Credit Agreement) plus 1.00%, plus (ii) the applicable rate, ranging from 0.25% to 0.75%, depending on the Company’s consolidated total leverage ratio (as defined in the Credit Agreement), provided that such sum is subject to a 1.0% floor, or (B) the sum of (i) the Term SOFR rate for such interest period, plus a spread adjustment of 0.10%, plus (ii) the applicable rate, ranging from 1.25% to 1.75%, depending on the Company’s Consolidated Total Leverage Ratio, provided that such sum is subject to a 0.00% floor. Default interest is 2.00% per annum in excess of the rate otherwise applicable in the case of any overdue principal or any other overdue amount.
In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Credit Facility in respect of unutilized revolving loan commitments and a fronting fee to the issuing bank with respect to letters of credit. The Company is also required to pay a participation fee to the administrative agent for the account of each lender with respect to the Company’s participations in letters of credit at the then applicable rate, ranging from 1.25% to 1.75%, on the average daily amount of each lender’s letter of credit exposure.
The Credit Facility will mature on August 9, 2026, with the Company’s option to request up to two additional 364-day extensions at the discretion of each lender and subject to customary conditions.
The Credit Agreement permits the Company to prepay any or all of the outstanding loans or to reduce the commitments under the Credit Facility without incurring premiums or penalties (except breakage costs with respect to loans bearing interest at the Adjusted Term SOFR Rate (as defined in the Credit Agreement)).
The Credit Agreement contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments or acquisitions, dispose of assets, pay dividends or other payments on capital stock, make restricted payments, engage in mergers or consolidations, enter into certain swap agreements, engage in transactions with affiliates, and enter into certain restrictive agreements. Immaterial subsidiaries of the Company are not subject to certain of the affirmative and negative covenants.
The Credit Agreement requires that the Company’s Consolidated Total Leverage Ratio tested on the last day of each fiscal quarter for the period of four consecutive fiscal quarters ending on such day not exceed 2.5 to 1.0. The Credit Agreement also requires that (A) each material broker-dealer subsidiary maintain monthly regulatory net capital in an amount equal to or in excess of 125% of the net capital amount required under applicable regulations and (B) MarketAxess Corporation maintain monthly regulatory net capital equal to or in excess of the greater of an amount that is (i) 125% of the net capital amount required under applicable regulations on or with respect to MarketAxess Corporation and (ii) 6.0% of MarketAxess Corporation’s aggregate debit items.
