UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2021
Regional Management Corp.
(Exact name of registrant as specified in its charter)
Delaware | 001-35477 | 57-0847115 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
979 Batesville Road, Suite B
Greer, South Carolina 29651
(Address of principal executive offices) (zip code)
(864) 448-7000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Common Stock, $0.10 par value | RM | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. | Entry into a Material Definitive Agreement. |
RMR V Warehouse Facility
On April 28, 2021 (the “Closing Date”), the Company and its wholly-owned subsidiary, Regional Management Receivables V, LLC (“RMR V”), entered into a Credit Agreement, by and among the Company, as servicer (the “Servicer”), RMR V, the lenders from time to time parties thereto (the “Lenders”), Wells Fargo Bank, National Association (“Wells Fargo”), as account bank (the “Account Bank”) and backup servicer (the “Backup Servicer”), JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”) (the “RMR V Credit Agreement”). The RMR V Credit Agreement provides for a revolving $100 million warehouse facility (the “RMR V Warehouse Facility”) and is secured by certain large and small consumer loans and convenience checks, including loans originated electronically and online (the “Receivables”), that were directly originated by the Company’s subsidiaries, Regional Finance Corporation of Alabama, Regional Finance Company of Georgia, LLC, Regional Finance Company of Illinois, LLC, Regional Finance Company of Missouri LLC, Regional Finance Company of New Mexico, LLC, Regional Finance Corporation of North Carolina, Regional Finance of Oklahoma, LLC, Regional Finance Corporation of South Carolina, Regional Finance Corporation of Tennessee, Regional Finance Corporation of Texas, Regional Finance Company of Virginia, LLC and Regional Finance Corporation of Wisconsin (each a “Seller” and “Subservicer,” and together the “Sellers” and “Subservicers”).
The following table summarizes certain aspects of the RMR V Warehouse Facility:
Facility Size | $100 million | |
Advance Rate1 | 80.00% | |
Interest Rate | With respect to any advance made by a Lender (the “Loans”) and any day in an Interest Period, a per annum rate equal to (i) (A) if the Loans are funded by a conduit lender through the issuance of commercial paper on such day and no facility amortization event or event of default has occurred, the CP Rate; (B) if the Loans are funded by a conduit lender through the issuance of commercial paper on such day and a facility amortization event has occurred but no event of default has occurred, the CP Rate plus the Amortization Adjustment; (C) if the Loans are funded by a conduit lender other than through the issuance of commercial paper or if funded by a committed lender on such day, the Bank Drawn Rate plus, if a facility amortization event has occurred but no event of default has occurred, the Amortization Adjustment; and (D) on and after the occurrence of an event of default, the Default Rate plus, in each case (ii) the Margin. | |
CP Rate | With respect to a conduit lender, the rate identified as its “CP Rate” in the related lender supplement. | |
Amortization Adjustment | 1.00% | |
Bank Drawn Rate | For any day, a rate per annum equal to the LIBO rate. | |
Default Rate | A per annum rate equal to the Alternate Base Rate plus 2.00%. | |
Margin | 2.20% | |
Alternate Base Rate | A rate per annum equal to the greatest of (a) the prime rate in effect on such day, (b) the NYFRB rate in effect on such day plus 1⁄2 of 1% and (c) the LIBO rate for a three month period on such day (or if such day is not a business day, the immediately preceding business day) plus 1%; provided that for the purpose of the definition, the LIBO rate for any day shall be based on the LIBO screen rate (or if the LIBO screen rate is not available for such one month interest period, the interpolated rate) at approximately 11:00 a.m. London time on such day. | |
Unused Commitment Fee Rate | 0.75% per interest period if the average Loans outstanding is £ 33 % of the aggregate commitments 0.60% per interest period if the average Loans outstanding is > 33% but £ 66% of the aggregate commitments 0.45% per interest period if the average Loans outstanding is > 66% of the aggregate commitments |
Revolving Period | The period commencing on the Closing Date and ending 18 months after the Closing Date. | |
Amortization Period | The period commencing upon the termination of the Revolving Period and ending 12 months after the commencement of such period. | |
Maturity Date | Upon termination of the Amortization Period |
1. | Less (i) 5.00% upon the occurrence and during the continuation of certain reporting or trigger events, and (ii) 5.00% if a hedge step-down event has occurred. |
In connection with the transactions contemplated by the RMR V Credit Agreement, on the Closing Date, and on each subsequent funding date (the “Funding Date”), each Seller will sell and transfer Receivables and related assets (“Transferred Assets”) originated by it to the Company pursuant to a first tier purchase agreement, and in turn the Company will sell and transfer Transferred Assets to the Borrower pursuant to a second tier purchase agreement. Recourse to each Seller and the Company is limited to an obligation of the applicable transferor to repurchase a Receivable if it is determined that there was a breach of a representation or warranty relating to such Receivable as of the Funding Date. Pursuant to the terms of the Credit Agreement, the Company is required to cure, repurchase from the Borrower or substitute any Receivable that was not an eligible Receivable. Separately, the Servicer is required to repurchase any Receivable that has been modified by the Servicer in excess of the concentration limits set forth in the Credit Agreement. The Borrower granted a lien on and security interest in all of its right, title, and interest in, to, and under the Transferred Assets and related collateral to the Administrative Agent, as agent for Lenders.
In connection with the closing of the RMR V Warehouse Facility, the Borrower and the Company paid the Lenders an upfront fee. In addition, the Borrower is required to pay interest at the applicable Interest Rate on the applicable loan balance from the Closing Date until the date such loan balance has been paid in full. The principal of the applicable loan is payable in installments on each payment date, unless the Borrower exercises its right to prepay such loan. The Borrower has the right to prepay all or any portion of the loans without penalty, upon delivery of a prepayment notice to the Administrative Agent, the agents, the Account Bank, and each hedge counterparty at least two business days prior to such prepayment. In connection with prepayment, the Borrower is required to pay to the secured parties certain breakage costs that are attributable to any administrative loss, cost, or expense (but excluding lost profits) incurred by the secured parties.
The RMR V Credit Agreement permits the Servicer to delegate in the ordinary course of business any or all of its duties and obligations thereunder to one or more Subservicers, provided that (i) each Subservicer is responsible for servicing the Receivables in the state in which such Subservicer is located, and (ii) the Servicer remains at all times responsible for the performance of each Subservicer’s duties and obligations. Each Subservicer will enter into a subservicing agreement with the Servicer. The RMR V Credit Agreement contains covenants that require the Servicer with respect to any collection period to maintain certain delinquency ratios, extension ratios, and annualized charge-off ratios. A failure to maintain such ratios may result in a Level I Trigger Event, Level II Trigger Event, or Level III Trigger Event. Upon the occurrence of a Level I Trigger Event followed by the delivery of written notice from the Administrative Agent (acting at the direction of the required Lenders), the Servicer and the Backup Servicer must work with the Administrative Agent and the Lenders to take certain actions to centralize servicing, including establishing a lockbox and directing the obligors to remit all future payments to such lockbox.
The RMR V Credit Agreement contains customary servicer termination events (subject to certain materiality thresholds and cure periods), including among others, (a) failure by the Servicer to deliver any collections or make any payment, transfer, or deposit, (b) a merger or consolidation of the Servicer in breach of the RMR V Credit Agreement, (c) failure to deliver a monthly report or monthly loan tape, (d) non-compliance with covenants, (e) breach of a representation or warranty, (f) an insolvency event involving the Servicer, (g) an event of default shall have occurred and have not been waived, or (h) any Subservicer fails to maintain all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its property and/or the conduct of its business with respect to the servicing of consumer loans (including the Receivables) requires such qualifications, licenses or approvals and which remains unremedied for 30 days after written notice of such failure by any governmental authority. The remedies for such servicer termination events are also customary for this type of transaction and include termination and replacement of the Servicer as servicer under the RMR V Credit Agreement.
The RMR V Credit Agreement also contains customary termination events (subject to certain materiality thresholds and cure periods), including among others, (a) non-payment, (b) non-compliance with covenants, (c) failure of the Administrative Agent to maintain a first prior perfected security interest in any material portion of the collateral, (d) a servicer termination event, (e) a representation or warranty was proved to be false or incorrect at the time it was made in a material respect and remains unremedied for 30 days, (f) an insolvency event involving the Company, the Borrower, or the Sellers, (g) a change in control of the Company or the Borrower, (h) an event of default under a material financing agreement
of any Regional Management entity occurs and such indebtedness is accelerated by the requisite holders, (i) the breach of any financial covenant occurs, and (j) the Company, the Borrower, or the Sellers have one or more final non-appealable judgements entered against it by a court of competent jurisdiction in excess of the specified monetary thresholds. The remedies for such termination events are also customary for this type of transaction and include acceleration of the Borrower’s outstanding obligations under the RMR V Credit Agreement.
The RMR V Credit Agreement also provides mechanics relating to a transition away from LIBOR as a benchmark interest rate and the replacement of LIBOR by a replacement alternative benchmark rate or mechanism.
The Lenders under the RMR V Credit Agreement (and their respective affiliates) have in the past provided and/or may in the future provide investment banking, underwriting, lending, commercial banking, trust, and other advisory services to the Company and its subsidiaries and affiliates. These parties have received, and may in the future receive, customary compensation from the Company and its subsidiaries and affiliates for such services.
For a complete description of the terms of the RMR V Credit Agreement, see Exhibit 10.1 hereto. The foregoing description is only a summary, does not purport to be complete, and is qualified in its entirety by reference to the full text of the RMR V Credit Agreement, which is incorporated by reference herein.
Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference herein.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit | Description | |
10.1 | Credit Agreement, dated April 28, 2021 by and among Regional Management Receivables V, LLC, as borrower, Regional Management Corp., as servicer, the lenders from time to time parties thereto, Wells Fargo Bank, National Association as account bank and backup servicer and JPMorgan Chase Bank, N.A. as administration agent. | |
99.1 | Press Release, dated April 29, 2021 | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Regional Management Corp. | ||||||
Date: April 29, 2021 | By: | /s/ Harpreet Rana | ||||
Harpreet Rana Executive Vice President and Chief Financial Officer |