Item 1.01 Entry into a Material Definitive Agreement.
Term Loan Agreement
On September 6, 2018 (the “Closing Date”), APX Group, Inc. (“APX Group” or the “Borrower”), a wholly owned subsidiary of the registrant, APX Group Holdings, Inc. (the “Company” or “Holdings”), entered into a Credit Agreement (the “Term Loan Agreement”), among the Borrower, Holdings, the other guarantors party thereto, each lender from time to time party thereto and Bank of America, N.A., as administrative agent. The Term Loan Agreement provides for total term loan commitments of $810.0 million.
The net proceeds from the Term Loan Agreement will be used to redeem in full the entire $269.5 million outstanding aggregate principal amount of the Borrower’s 6.375% Senior Secured Notes due 2019 (the “2019 Notes”) and pay the related accrued interest and redemption premium, to repurchase approximately $250.7 million aggregate principal amount of the Borrower’s outstanding 8.75% Senior Notes due 2020 (the “2020 Notes”) in privately negotiated transactions, and to pay fees and expenses related to the Term Loan Agreement and the transactions described above. The remaining net proceeds will be used for general corporate purposes, including the repayment of outstanding borrowings under the Borrower’s revolving credit facility (the “Revolving Facility”).
Interest Rate
Borrowings under the Term Loan Agreement bear interest at a rate per annum equal to an applicable margin plus, at the Borrower’s option, either (1) the base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) the LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month, plus 1.00% or (2) the LIBOR rate determined by reference to the London interbank offered rate for dollars for the interest period relevant to such borrowing. The applicable margin for base rate-based borrowings is 4.0% per annum and the applicable margin for LIBOR rate-based borrowings is 5.0% per annum
Amortization and Final Maturity
The Borrower is required to make quarterly amortization payments under the Term Loan Agreement in an amount equal to 0.25% of the aggregate principal amount of term loans outstanding on the Closing Date. The remaining principal amount outstanding under the term loan facility will be due and payable in full on (x) if the Springing Maturity Condition does not apply, March 31, 2024 and (y) if the Springing Maturity Condition does apply, either the Springing Maturity Date for 2020 Notes or the Springing Maturity Date for 2023 Notes, as applicable. The “Springing Maturity Condition” applies if either (i) on the Springing Maturity Date for 2020 Notes, an aggregate amount of 2020 Notes in excess of $275.0 million are either outstanding or have not been repaid or redeemed or (ii) on the Springing Maturity Date for 2023 Notes, an aggregate principal amount of the Borrower’s 7.625% Senior Unsecured Notes Due 2023 (the “2023 Notes”) in excess of $125.0 million are either outstanding or have not been repaid or redeemed. The “Springing Maturity Date for 2020 Notes” means the date that is 91 days before the maturity date with respect to the 2020 Notes and the “Springing Maturity Date for 2023 Notes means the date that is 91 days before the maturity date with respect to the 2023 Notes.
Guarantees and Security
Obligations under the Term Loan Agreement are unconditionally guaranteed by Holdings and each of the Borrower’s existing and future U.S. wholly-owned restricted subsidiaries (with certain exceptions for immaterial subsidiaries) and are secured by a perfected security interest in substantially all of the assets of the Borrower and the guarantors, in each case, now owned or later acquired, including a pledge of all of the Borrower’s capital stock, the capital stock of substantially all of the Borrower’s U.S. wholly-owned restricted subsidiaries and 65% of the capital stock of certain of the Borrower’s foreign restricted subsidiaries, subject in each case to the exclusion of certain assets and additional exceptions.
Ranking
The collateral securing the obligations under the Term Loan Agreement, together with the Borrower’s outstanding indebtedness under the Revolving Facility, its secured notes and certain other future indebtedness and obligations permitted under the indentures governing the Borrower’s outstanding notes, the Term Loan Agreement and the Revolving Facility, are subject to first priority liens securing such indebtedness. However, under the terms of an existing intercreditor agreement, borrowings under the Revolving Facility and up to an additional $60.0 million of future “superpriority” borrowings under incremental facilities under either the Term Loan Agreement or the Revolving Facility will effectively rank ahead of the Borrower’s outstanding secured notes and the term loans under the Term Loan Agreement.
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