| Item 1.01. | Entry into a Material Definitive Agreement. |
On December 10, 2020, Hilton Grand Vacations Parent LLC (“Holdings”), Hilton Grand Vacations Borrower LLC (the “Borrower”), Hilton Grand Vacations Inc. (the “Company”), and certain subsidiaries of the Borrower, entered into Amendment No. 3 to the Credit Agreement (the “Amendment”) which amended the Credit Agreement, dated as of December 28, 2016, as amended by Amendment No. 1 to the Credit Agreement, dated as of November 28, 2018, and Amendment No. 2 to the Credit Agreement, dated as of May 8, 2020, by and among the Borrower, the guarantors party thereto, the lenders party thereto, and Bank of America, N.A. as administrative agent, collateral agent, swing line lender and L/C issuer thereunder (as amended by the Amendment, the “Credit Agreement”), which amended certain terms of the credit facilities provided pursuant to the Credit Agreement (the “Credit Facilities”).
The Amendment is intended to provide a temporary waiver from the Borrower’s consolidated first lien net leverage financial covenant while at the same time imposing certain temporary restrictions during the waiver period, referred to in the Amendment as the “Waiver Period.” The waiver, the Waiver Period and any related restrictions may be unilaterally terminated by the Borrower in its sole discretion at any time. The Waiver Period begins on January 1, 2021 and terminates upon the earlier of (i) October 1, 2021 and (ii) any date designated by the Borrower, in its sole discretion, by delivering a written notice to the administrative agent as the date on which the Waiver Period will terminate.
For any applicable test periods during the Waiver Period, the consolidated first lien net leverage ratio financial covenant test will not apply. Additionally, on the last day of any fiscal quarter during the Waiver Period, the Borrower will not permit its liquidity to be less than $175,000,000. The Company may make a cash contribution to, or purchase or make an investment in, an equity interest of Holdings and the amount of the net cash proceeds will be deemed to increase liquidity as long as the proceeds are actually received by the Borrower as cash or common equity during a specified time frame and are not otherwise applied to certain other obligations.
The Borrower and its restricted subsidiaries are not permitted to declare or make restricted payments to other restricted subsidiaries during the Waiver Period other than pursuant to certain exceptions, such as restricted payments (i) to the Borrower and/or other restricted subsidiaries based on their relative equity ownership interests, (ii) consisting solely of additional equity interests, (iii) to cover ordinary course operating costs and expenses and other corporate overhead costs and expenses that are reasonable, and (iv) to pay for income and similar taxes, among others.
During the Waiver Period, borrowings under the Credit Facilities will bear interest at 2.50% per annum for base rate loans and 3.50% per annum for LIBOR rate loans.
This summary is qualified in its entirety by reference to the full text of the Amendment, filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference, and other Loan Documents (as defined in the Credit Agreement). Except as described in this Current Report on Form 8-K or as set forth in the Amendment, all other terms and provisions of the Credit Agreement, including, without limitation, those provisions related to maturity date, maximum borrowing amounts, amortization, events of default, prepayment, and guarantees and collateral, remain the same.
Important Statement Regarding Forward-Looking Statements
The statements in this Current Report on Form 8-K, including the exhibits hereto, may include forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “would,” “could,” or similar expressions indicate a forward-looking
