Item 1.01 Entry into a Material Definitive Agreement.
On November 9, 2018 (the “Closing Date”), Premier Healthcare Alliance, L.P. (“Premier LP”), along with its wholly owned subsidiaries, Premier Supply Chain Improvement, Inc. (“PSCI”) and Premier Healthcare Solutions, Inc. (“PHSI”), asCo-Borrowers, Premier Services, LLC (“Services”) and certain domestic subsidiaries of Services, as Guarantors, Wells Fargo Bank, National Association, as Administrative Agent (the “Administrative Agent”), Swing Line Lender and an L/C Issuer, other lenders from time to time party thereto, and Wells Fargo Securities, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arrangers and Joint Book Managers, entered into an unsecured Credit Agreement, dated as of November 9, 2018 (the “Credit Agreement”). Services is a wholly-owned subsidiary of Premier, Inc. (“Premier”) and serves as the sole general partner of Premier LP. The Credit Agreement has a maturity date of November 9, 2023, subject to up to twoone-year extensions at the request of theCo-Borrowers and approval of a majority of the lenders under the Credit Agreement.
The Credit Agreement provides for a revolving credit facility of up to $1.0 billion (the “Credit Facility”) with (i) a $50.0 million subfacility for standby letters of credit and (ii) a $100.0 million subfacility for swingline loans. The Credit Agreement also provides thatCo-Borrowers may from time to time (i) incur incremental term loans and (ii) request an increase in the revolving commitments under the Credit Facility, together up to an aggregate of $350.0 million, subject to the approval of the lenders providing such term loans or revolving commitment increase. The Credit Agreement contains an unconditional and irrevocable guaranty of all obligations ofCo-Borrowers under the Credit Agreement by the current and future Guarantors. Premier is not a guarantor under the Credit Agreement.
The Credit Agreement refinanced the Credit Agreement, dated June 24, 2014 and amended as of June 4, 2015, among theCo-Borrowers, Services, certain subsidiary guarantors, the lender parties thereto and the Administrative Agent (the “Prior Loan Agreement”), and the Prior Loan Agreement was terminated on the Closing Date. The Prior Loan Agreement included a $750.0 million unsecured revolving credit facility. The Prior Loan Agreement was scheduled to mature on June 24, 2019. At the time of its termination, outstanding borrowings, accrued interest and fees and expenses under the Prior Loan Agreement totaled approximately $100.7 million, which was repaid with cash on hand and borrowings under the new Credit Facility.
The Credit Agreement permitsCo-Borrowers to prepay amounts outstanding under the Credit Facility without premium or penalty, provided, however, thatCo-Borrowers are required to compensate the lenders for losses and expenses incurred as a result of the prepayment of any Eurodollar Rate Loan. Committed loans under the Credit Agreement may be in the form of Eurodollar Rate Loans or Base Rate Loans, at the option ofCo-Borrowers. Eurodollar Rate Loans bear interest at the London Interbank Offered Rate (“LIBOR”) plus the Applicable Rate (defined as a margin based on the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement)). Base Rate Loans bear interest at the Base Rate (defined as the highest of the prime rate announced by the Administrative Agent, the federal funds effective rate plus 0.50%, theone-month LIBOR plus 1.0%, and 0.0%), plus the Applicable Rate. The Applicable Rate ranges from 1.000% to 1.500% for Eurodollar Rate Loans and 0.000% to 0.500% for Base Rate Loans. On the Closing Date, the interest rate for Eurodollar Rate Loans was 3.615%, and the interest rate for Base Rate Loans was 5.250%.Co-Borrowers are required to pay a commitment fee ranging from 0.100% to 0.200% per annum on the actual daily unused amount of commitments under the Credit Facility. The initial amount of the commitment fee was set at 0.100%.
The Credit Agreement contains customary representations and warranties ofCo-Borrowers and Guarantors (collectively, the “Loan Parties”) for the benefit of the Administrative Agent and the lenders. The Credit Agreement also contains customary affirmative and negative covenants, including, among others, limitations on liens, indebtedness, fundamental changes, dispositions, restricted payments and investments. Under the terms of the Credit Agreement, the Loan Parties are not permitted to allow the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) to exceed 3.75 to 1.00 for any period of four consecutive fiscal quarters, provided that, in connection with any acquisition for which the aggregate consideration exceeds $250.0 million, the maximum Consolidated Total Net Leverage Ratio may be increased to 4.25 to 1.00 for the four consecutive fiscal quarter period beginning with the quarter in which such acquisition is completed. In addition, the Loan Parties must maintain a minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of 2.50 to 1.00 at the end of every fiscal quarter. The Credit Agreement also contains customary events of default including, among others, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults of any
