Amendment to the 2017 Credit Facility
In connection with the 2019 Senior Credit Facility, on March 8, 2019, the Company entered into that certain Amendment and Waiver No. 1 to Credit Agreement(the “Amendment to the 2017 Credit Facility”) together with the required lenders party thereto, Credit Suisse AG, as administrative agent and collateral agent, and the other loan parties party thereto, amending that certain Credit Agreement, dated as of June 30, 2017, as previously amended (the “2017 Credit Facility”) by and among the Company, Credit Suisse AG, as administrative agent and collateral agent, and the lenders party thereto. On March 8, 2019, the Company and the Subsidiary guarantors also entered into Amendment No. 2 to the Guarantee and Collateral Agreement entered into in connection with the 2017 Credit Facility. For a more fulsome discussion of the terms of the 2017 Credit Facility and the prior amendments thereto, please refer to the Forms8-K filed by the Company with the United States Securities and Exchange Commission (the “SEC”) on June 30, 2017, September 25, 2017 and March 2, 2018, respectively.
The Amendment to the 2017 Credit Facility increased the interest rate on the term loans outstanding under the 2017 Credit Facility (the “2017 Term Loans”) by, at the Company’s option, either (i) 2.00% per annum (which shall be reduced to 1.00% per annum if the Senior Secured Leverage Ratio Condition is satisfied), payable in cash or (ii) 4.00% per annum,payable-in-kind. The Senior Secured Leverage Ratio Condition for the period of the four most recent fiscal quarters ending as of the last day of the most recently ended fiscal quarter for which financial statements have been or were required to be delivered pursuant to the 2017 Credit Facility (the “Senior Secured Leverage Ratio Condition”) means that that the Senior Secured Leverage Ratio (as defined in the 2017 Credit Facility) for such period is not greater than (i) 4.75:1.00 for fiscal quarters ending September 30, 2019 and December 31, 2019 and (ii) 4.25:1.00 for any fiscal quarter ending thereafter. In addition, the Amendment to the 2017 Credit Facility increased the commitment fee for the undrawn portion of the revolving credit facility under the 2017 Credit Facility from 0.50% to 1.00% per annum.
If the Company has repaid all indebtedness under the 2019 Senior Credit Facility, the Amendment to the 2017 Credit Facility requires the Company to use net cash proceeds of certain asset sales and other dispositions of property and certain casualty insurance proceeds to prepay outstanding term and revolving credit loans. If the 2017 Term Loans are repaid (except pursuant to the regularly scheduled amortization payments of the 2017 Term Loans) or prepaid at any time, the Amendment to the 2017 Credit Facility requires the payment of (i) a 2.00% premium if paid on or prior to the first anniversary of the closing of the Amendment to the 2017 Credit Facility and (ii) a 1.00% premium if paid after the first anniversary but before the second anniversary of the closing of the Amendment to the 2017 Credit Facility.
The Amendment to the 2017 Credit Facility contains financial covenants with respect to the Senior Secured Leverage Ratio (as defined therein) and budgeting and lender reporting covenants that mirror those contained in the 2019 Senior Credit Facility. It also restricts certain Company actions, including certain acquisitions and joint venture arrangements.
The Amendment to the 2017 Credit Facility permits the Company to enter into the 2019 Senior Credit Facility and to incur the related liens subject to an Intercreditor Agreement which will, among other things, subordinate the liens of the lender parties to the 2017 Credit Facility to the liens of the lender parties to the 2019 Senior Credit Facility.
The 2019 Senior Credit Facility and Amendment to the 2017 Credit Facility contain customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, invalidity of loan documents and certain changes in control.
The foregoing description of the 2019 Senior Credit Facility, the Guarantee and Collateral Agreement, the Amendment to the 2017 Credit Facility and the Intercreditor Agreement does not purport to be complete and is qualified in its entirety by reference to the complete 2019 Senior Credit Facility, the complete Guarantee and Collateral Agreement, the complete Amendment to the 2017 Credit Facility and the complete Intercreditor Agreement, copies of each of which will be timely filed with the SEC.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant. |
The information disclosed under Item 1.01 of this Current Report onForm 8-K (this “Report”) is incorporated by reference into this Item 2.03.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On March 12, 2019, the Company and Thomas W. Doub, Ph.D, entered into a separation and mutual release agreement. Pursuant to the agreement, Dr. Doub, who previously transitioned his chief compliance and clinical officer roles to other senior Company personnel, will remain a Company employee until June 30, 2019, contributing to certain outcomes research and other initiatives.
| Item 7.01 | Regulation FD Disclosure. |
The information disclosed under Item 1.01 and Item 2.03 of this Report is incorporated by reference into this Item 7.01.
On March 13, 2019, the Company issued a press release (the “Press Release”) announcing operational highlights and other recent developments for the quarter and year ended December 31, 2018. In addition, the Company has postponed its conference call scheduled for March 13, 2019 as the Company requires additional time to complete the consolidated financial statements for the year ended December 31, 2018. The Company intends to reschedule its earnings conference call and issue guidance for the 2019 fiscal year, following completion of its consolidated financial statements.
| Item 9.01 | Exhibits and Financial Statements. |
Forward Looking Statements
This Report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are made only as of the date of this Report. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “may,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements may include information concerning the Company’s possible or assumed future results of operations, including descriptions of the Company’s revenue, profitability, outlook and overall business strategy. Forward-looking statements may include information concerning AAC Holding, Inc.’s subsidiaries (collectively with its subsidiaries, “AAC Holdings” or the “Company”) possible or assumed future results of operations, including descriptions of the Company’s revenue, profitability, outlook and overall business strategy. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from the information contained in the forward-looking statements. These risks, uncertainties and other factors include, without limitation: (i) our inability to effectively operate our facilities; (ii) our reliance on our sales and marketing program to continuously attract and enroll clients; (iii) a reduction in reimbursement rates by certain third-party payors for inpatient and outpatient services and point-of-care and definitive lab testing; (iv) our failure to successfully achieve growth through acquisitions and de novo projects; (v) the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of an acquisition; (vi) our failure to achieve anticipated financial results from contemplated and prior acquisitions; (vii) a disruption in our ability to perform diagnostic laboratory services; (viii) maintaining compliance with applicable regulatory authorities, licensure and permits to operate our facilities and laboratories; (ix) a disruption in our business and reputational and economic risks associated with civil claims by various parties; (x) inability to meet the covenants in our loan documents or lack of borrowing capacity; (xi) our inability to effectively integrate acquired facilities; and (xii) general economic conditions, as well as other risks discussed in the “Risk Factors” section of the Company’s most recently filed Annual Report on Form 10-K, Quarterly Report on Form 10-Q and other filings with the Securities and Exchange Commission; and (xii) risks related to the closing process for our fiscal year ended December 31, 2018. As a result of these factors, we cannot assure that the forward-looking statements in this Report will prove to be accurate. Investors should not place undue reliance upon forward-looking statements.
