Indebtedness | 12 Months Ended |
Jan. 31, 2015 |
Debt Disclosure [Abstract] | |
Indebtedness | (7) Indebtedness |
Debt outstanding as of January 31, 2015 and 2014 was as follows: |
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| | January 31, | | | January 31, | | | | | | | | | |
(in thousands) | | 2015 | | | 2014 | | | | | | | | | |
4.25% Convertible Notes | | $ | 110,055 | | | $ | 106,782 | | | | | | | | | |
Asset-based facility | | | 21,964 | | | | — | | | | | | | | | |
Capitalized lease obligations | | | 270 | | | | 480 | | | | | | | | | |
Less amounts representing interest | | | (10 | ) | | | (16 | ) | | | | | | | | |
Notes payable | | | — | | | | — | | | | | | | | | |
Total debt | | | 132,279 | | | | 107,246 | | | | | | | | | |
Less current maturities of long-term debt | | | (142 | ) | | | (128 | ) | | | | | | | | |
Total long-term debt | | $ | 132,137 | | | $ | 107,118 | | | | | | | | | |
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As of January 31, 2015, debt outstanding will mature as follows: |
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(in thousands) | | 4.25% Convertible Notes | | | Asset-based facility | | | Capitalized lease obligations | | | Total | |
2016 | | $ | — | | | $ | — | | | $ | 142 | | | $ | 142 | |
2017 | | | — | | | | — | | | | 102 | | | | 102 | |
2018 | | | — | | | | — | | | | 9 | | | | 9 | |
2019 | | | 110,055 | | | | — | | | | 7 | | | | 110,062 | |
2020 | | | — | | | | 21,964 | | | | — | | | | 21,964 | |
Total | | $ | 110,055 | | | $ | 21,964 | | | $ | 260 | | | $ | 132,279 | |
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Asset-based Revolving Credit Facility |
On April 15, 2014, Layne entered into a five-year $135.0 million senior secured asset-based facility, of which up to an aggregate principal amount of $75.0 million will be available in the form of letters of credit and up to an aggregate principal amount of $15.0 million is available for short-term swingline borrowings. |
The asset-based facility was amended on July 29, 2014, September 15, 2014, October 28, 2014 and January 23, 2015, to (1) permit the dispositions of Costa Fortuna and Tecniwell, businesses within the Geoconstruction segment, (2) restrict prepayment of indebtedness subordinate to the asset-based facility to certain permitted refinancings of such indebtedness, (3) change the thresholds and any applicable grace period for when a Covenant Compliance Period will commence, as described below, (4) impose certain other additional monthly reporting requirements, and (5) to provide additional security interests in certain assets to surety providers through equipment utilization agreements, which also provides for use of the specified assets by the surety provider under certain circumstances. An additional reserve was established based on the value of the assets subject to the equipment utilization agreement (which is listed as the “equipment reserve” in the definition of borrowing based below). The amendments fixed the applicable margin at 3.25% for LIBOR rate loans and 2.25% for alternate base rate loans until the fixed charge coverage ratio (measured on a trailing four fiscal quarter period) is at least 1.0 to 1.0 for two consecutive fiscal quarters, at which time the applicable margin will revert to being determined based on usage of the asset-based facility. |
Availability under the asset-based facility will be the lesser of (i) $135.0 million and (ii) the borrowing base (as defined in the asset-based facility agreement). The borrowing base is defined as: |
· | 85% of book value of eligible accounts receivable (other than unbilled receivables), plus | | | | | | | | | | | | | | | |
· | 60% of eligible unbilled receivables, plus | | | | | | | | | | | | | | | |
· | real property availability, plus | | | | | | | | | | | | | | | |
· | equipment availability, minus | | | | | | | | | | | | | | | |
· | the supplemental reserve, minus | | | | | | | | | | | | | | | |
· | the equipment reserve, minus | | | | | | | | | | | | | | | |
· | any additional reserves established from time to time by the co-collateral agents. | | | | | | | | | | | | | | | |
As of January 31, 2015, the borrowing base was approximately $ 108.3 million with $21.9 million borrowed under the asset-based facility and $31.3 million of outstanding letters of credit, leaving Excess Availability (described below) of $55.1 million. |
The balance sheet classification of the borrowings under the asset-based facility has been determined in accordance with ASC Topic 470-10-45, “Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include both a Subjective Acceleration Clause and a Lock-Box Arrangement”. Accordingly, the borrowings have been classified as a long-term liability in the accompanying Consolidated Balance Sheet. |
Layne has the right to request the lenders to further increase the asset-based facility up to an additional $65.0 million if it is not in default under the agreement; however, there are no commitments from the lenders for any such increase. |
The asset-based facility is guaranteed by assets of Layne’s direct and indirect wholly owned domestic subsidiaries, subject to certain exceptions described in the asset-based facility. The obligations under the asset-based facility are secured by a lien on substantially all of the assets of Layne and the subsidiary guarantors, subject to certain exceptions described in the asset-based facility, including a pledge of up to 65% of the equity interest of Layne’s first tier foreign subsidiaries. |
Advances under the asset-based facility are subject to certain conditions precedent, including the accuracy of certain representations and warranties and the absence of any default or event of default. Future advances may be used for general corporate and working capital purposes, and to pay fees and expenses associated with the asset-based facility. |
Pursuant to the asset-based facility agreement, the revolving loans will bear interest at either: |
· | the alternate base rate plus the applicable margin. The alternate base rate is equal to the highest of (a) the base rate, (b) the sum of the Federal Funds Open rate plus 0.5%, and (c) the sum of the Daily LIBOR rate plus 1%. Or | | | | | | | | | | | | | | | |
· | the LIBOR rate (as defined in the asset-based facility agreement) for the interest period in effect for such borrowing plus the applicable margin. | | | | | | | | | | | | | | | |
Swingline loans will bear interest at the alternate base rate plus the applicable margin. In connection with letters of credit issued under the asset-based facility, Layne will pay (i) a participation fee to the lenders equal to the applicable margin from time to time used to determine the interest rate on Eurodollar loans (as defined in the asset-based facility agreement) on the average daily amount of such lender’s letter of credit exposure, as well as the issuing bank’s customary fees and charges. |
The asset-based facility contains various restrictions and covenants, including restrictions on dispositions of certain assets, incurrence of indebtedness, investments, distributions, capital expenditures, acquisitions and prepayment of certain indebtedness. In general, provided that Layne maintains a certain level of Excess Availability, Layne will not be restricted from incurring additional unsecured indebtedness or making investments, distributions, capital expenditures or acquisitions. |
Layne must maintain a cumulative minimum cash flow as defined in the agreement of not less than negative $45.0 million and during any twelve consecutive month period (or until March 31, 2015, the cumulative period from May 1, 2014), a minimum cash flow of not less than negative $25.0 million, until: |
· | for a period for 30 consecutive days, Excess Availability is greater than the greater of 17.5% of the Total Availability or $25.0 million, and | | | | | | | | | | | | | | | |
· | for two consecutive fiscal quarters after the closing date, the fixed charge coverage ratio (tested on a trailing four fiscal quarter basis) has been in excess of 1.0 to 1.0. | | | | | | | | | | | | | | | |
Minimum cash flow is defined as consolidated EBITDA minus the sum of: |
· | capital expenditures | | | | | | | | | | | | | | | |
· | cash interest expense | | | | | | | | | | | | | | | |
· | any regularly scheduled amortized principal payments on indebtedness | | | | | | | | | | | | | | | |
· | cash taxes and | | | | | | | | | | | | | | | |
· | any amount in excess of $10.0 million paid with respect to the FCPA investigation | | | | | | | | | | | | | | | |
After giving effect to the amendments, if Excess Availability is less than the greater of 17.5% of Total Availability or $25.0 million for more than one business day, then a “Covenant Compliance Period” (as defined in the asset-based facility agreement) will exist until Excess Availability has been equal to or greater than the greater of 17.5% of the Total Availability or $25.0 million for a period of 30 consecutive days. Layne must maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 and a maximum first lien leverage ratio of not greater than 5.0 to 1.0 for the four fiscal quarters ended immediately preceding any Covenant Compliance Period and for any four fiscal quarter period ending during a Covenant Compliance Period. If Layne had been in a Covenant Compliance Period during FY 2015 it would not have been in compliance with the minimum fixed charge coverage ratio. Layne also would not have been in compliance with the maximum first lien leverage ratio during the fiscal quarters ending July 31, 2014 and January 31, 2015 had a Covenant Compliance Period been in effect during those quarters. |
The asset-based facility also contains a subjective acceleration clause that can be triggered if the lenders determine that Layne has experienced a material adverse change. If triggered, this clause would create an Event of Default (as defined in the asset-based facility), which in turn would permit the lenders to accelerate repayment of outstanding obligations. |
In general, during a Covenant Compliance Period or if an Event of Default has occurred and is continuing, all of Layne’s funds received on a daily basis will be applied to reduce amounts owing under the asset-based facility. Based on current projections Layne does not anticipate being in a Covenant Compliance Period during the next twelve months. |
If an Event of Default (as defined in the asset-based facility agreement) occurs and is continuing, the interest rate under the asset-based facility will increase by 2% per annum and the lenders may accelerate all amounts owing under the asset-based facility. Defaults under the asset-based facility include (but are not limited to) the following: |
· | non-payment of principal, interest, fees and other amounts under the asset-based facility | | | | | | | | | | | | | | | |
· | failure to comply with any of the negative covenants, certain of the specified affirmative covenants or other covenants under the asset-based facility | | | | | | | | | | | | | | | |
· | failure to pay certain indebtedness when due | | | | | | | | | | | | | | | |
· | specified events of bankruptcy and insolvency | | | | | | | | | | | | | | | |
· | one or more judgments of $5.0 million not covered by insurance and not paid within a specified period. | | | | | | | | | | | | | | | |
· | a change in control as defined in the asset-based facility. | | | | | | | | | | | | | | | |
Because Excess Availability currently is, and is expected to be for the next twelve months, sufficient not to trigger a Covenant Compliance Period, Layne is and anticipates being in compliance with the applicate debt covenants associated with the asset-based facility for the next twelve months. |
The asset-based facility was subsequently amended on March 2, 2015 to permit the issuance of the 8.0% Senior Secured Second Lien Convertible Notes (8.0% Convertible Notes) in the offering described below, the exchange a portion of the 4.25% Convertible Notes in the related Exchange and the grant of the subordinated liens securing the 8.0% Convertible Notes issued in the offering. In addition, the amendment, among other things: |
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· reduced the maximum amount that may be borrowed under the asset-based facility from $135.0 million to $120.0 million until Layne has delivered to the agent under the asset-based facility financial statements and a compliance certificate for any fiscal quarter commencing after the date of the amendment demonstrating, for such fiscal quarter and for the immediately preceding fiscal quarter, a Consolidated Fixed Charge Coverage Ratio (as defined in the asset-based facility agreement) of at least 1.00 to 1.00 for four consecutive quarters ending with such fiscal quarters; | | | | | | | | | | | | | | | | |
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· increased the applicable interest rate margin under the asset-based facility agreement by 0.5%; | | | | | | | | | | | | | | | | |
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· increased the quarterly commitment fee on unused commitments from 0.375% to 0.5% if the daily average Total Revolving Exposure (as defined in the asset-based credit agreement) during the quarter exceeds 50% of the Total Revolving Commitments (as defined in the asset-based facility agreement); | | | | | | | | | | | | | | | | |
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· eliminated any of Layne’s owned real estate from the borrowing base which accounted for approximately $4.2 million of Layne’s borrowing base at the time of such amendment; | | | | | | | | | | | | | | | | |
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· requires the delivery of a monthly forecast of cash flows for the following 13-weeks; | | | | | | | | | | | | | | | | |
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· if at the end of any business day, Layne or any of the co-borrowers under the asset-based facility have cash or cash equivalents (less any outstanding checks and electronic funds transfers) in excess of $15.0 million (excluding any amounts in bank accounts used solely for payroll, employee benefits or withholding taxes), require Layne to use such excess amounts to prepay any revolving loans then outstanding by the end of the following business day; and | | | | | | | | | | | | | | | | |
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· will accelerate the maturity date to May 15, 2018 if each of the following has not yet occurred on or before such date: (i) either (a) all of the 8.0% Convertible Notes (or Permitted Refinancing Indebtedness (as defined in the asset-based facility agreement) in respect thereof) are converted or (b) the maturity date of the 8.0% Convertible Notes (or Permitted Refinancing Indebtedness in respect thereof) is extended to a date which is after October 15, 2019, and (ii) either (a) all of the 4.25% Convertible Notes (or Permitted Refinancing Indebtedness in respect thereof) are converted, (b) the maturity date for the 4.25% Convertible Notes (or Permitted Refinancing Indebtedness in respect thereof) is extended to a date which is after October 15, 2019, or (c) the 4.25% Convertible Notes are effectively discharged. The 4.25% Convertible Notes will be effectively discharged after, among other things, Layne has irrevocably deposited with the trustee of the 4.25% Convertible Notes cash in an amount sufficient to pay any remaining interest and principal payments due on any then remaining unconverted 4.25% Convertible Notes, with irrevocable instructions to the trustee to make such payments to the holders of the 4.25% Convertible Notes as they become due. | | | | | | | | | | | | | | | | |
The asset-based facility, as amended in March 2015, will permit Layne to make certain voluntary prepayments, payments, repurchases or redemptions, retirements, defeasances or acquisitions for value of the 8.0% Convertible Notes if the following payment conditions are satisfied: |
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· there is no default before or after such action; | | | | | | | | | | | | | | | | |
· the Supplemental Reserve (as defined in the asset-based facility agreement) is zero; | | | | | | | | | | | | | | | | |
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· thirty-Day Excess Availability and Excess Availability (each as defined in the asset-based facility) on a pro forma basis is equal to or exceeds the greater of (A) 22.5% of the Total Availability and (B) $30.0 million; and | | | | | | | | | | | | | | | | |
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· Layne has on a pro forma basis a Consolidated Fixed Charge Coverage Ratio of not less than 1.1:1.0. | | | | | | | | | | | | | | | | |
4.25% Convertible Senior Notes |
On November 5, 2013 Layne entered into a purchase agreement (the “Purchase Agreement”) with Jefferies LLC (the “Initial Purchaser”) relating to the sale by Layne of $110.0 million aggregate principal amount of 4.25% Convertible Notes due 2018 (the “4.25% Convertible Notes”), in a private placement to “qualified institutional buyers” in the U.S., as defined in Rule 144A under the Securities Act. The Purchase Agreement contained customary representations, warranties and covenants by Layne together with customary closing conditions. Under the terms of the Purchase Agreement, Layne agreed to indemnify the Initial Purchaser against certain liabilities. The offering of the 4.25% Convertible Notes was completed on November 12, 2013, in accordance with the terms of the Purchase Agreement. The sale of the 4.25% Convertible Notes generated net proceeds of approximately $105.4 million after deducting the Initial Purchaser’s discount and commission and the estimated offering expenses payable by Layne. These proceeds were used to pay down the existing balance on the then existing revolving credit agreement. The Purchase Agreement also provided the Initial Purchaser an option to purchase up to an additional $15.0 million aggregate principal amount of 4.25% Convertible Notes. On December 5, 2013, the Initial Purchaser exercised this option, which generated proceeds net of the Initial Purchaser’s discount and commission in the amount of $14.6 million. Layne used these proceeds primarily as an increase in cash on hand. The 4.25% Convertible Notes were issued pursuant to an Indenture, dated November 12, 2013 (the “4.25% Convertible Notes Indenture”), between Layne and U.S. Bank National Association, as trustee. The 4.25% Convertible Notes are senior, unsecured obligations of Layne. The 4.25% Convertible Notes are convertible, at the option of the holders, into consideration consisting of, at Layne’s election, cash, shares of Layne’s common stock, or a combination of cash and shares of Layne’s common stock (and cash in lieu of fractional shares) until the close of business on the scheduled trading day immediately preceding May 15, 2018. However, before May 15, 2018, the 4.25% Convertible Notes will not be convertible except in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2013 (and only during such calendar quarter), if the last reported sale price of Layne’s common stock for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on such trading day; (2) during the consecutive five business day period immediately after any five consecutive trading day period (the five consecutive trading day period being referred to as the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the 4.25% Convertible Notes, as determined following a request by a holder of the 4.25% Convertible Notes in the manner required by the 4.25% Convertible Notes Indenture, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Layne’s common stock and the conversion rate on such trading day; (3) upon the occurrence of specified corporate events described in the 4.25% Convertible Notes Indenture; and (4) if Layne has called the 4.25% Convertible Notes for redemption. Layne will be required to settle conversions in shares of Layne’s common stock, together with cash in lieu of any fractional shares, until it has obtained stockholder approval to settle the 4.25% Convertible Notes in cash or a combination of cash and shares of Layne’s common stock. As of January 31, 2015, the if-converted value did not exceed its principal amount. |
The 4.25% Convertible Notes bear interest at a rate of 4.25% per year, payable semi-annually in arrears in cash on May 15 and November 15 of each year, beginning on May 15, 2014. The 4.25% Convertible Notes will mature on November 15, 2018, unless earlier repurchased, redeemed or converted. |
The initial conversion rate was 43.6072 shares of Layne’s common stock per $1,000 principal amount of 4.25% Convertible Notes (which is equivalent to an initial conversion price of approximately $22.93 per share of Layne’s common stock). The conversion rate will be subject to adjustment upon the occurrence of certain events. In addition, Layne may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including Layne’s calling the 4.25% Convertible Notes for redemption. |
On and after November 15, 2016, and prior to the maturity date, Layne may redeem all, but not less than all, of the 4.25% Convertible Notes for cash if the sale price of Layne’s common stock equals or exceeds 130% of the applicable conversion price for a specified time period ending on the trading day immediately prior to the date Layne delivers notice of the redemption. The redemption price will equal 100% of the principal amount of the 4.25% Convertible Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, upon the occurrence of a fundamental change (as defined in the 4.25% Convertible Notes Indenture), holders of the 4.25% Convertible Notes will have the right, at their option, to require Layne to repurchase their 4.25% Convertible Notes in cash at a price equal to 100% of the principal amount of the 4.25% Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. |
In accordance with ASC 470-20, “Debt with Conversion and Other Options,” Layne separately accounts for the liability and equity conversion components of the 4.25% Convertible Notes. The principal amount of the liability component of the 4.25% Convertible Notes was $106.0 million as of the date of issuance based on the present value of its cash flows using a discount rate of 8.0%, Layne’s approximate borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity conversion component was $19.0 million. A portion of the Initial Purchaser’s discount and commission and the offering costs totaling $0.8 million and deferred taxes totaling $7.1 million were allocated to the equity conversion component. The liability component will be accreted to the principal amount of the 4.25% Convertible Notes using the effective interest method over five years. |
In accordance with guidance in ASC 470-20 and ASC 815-15, “Embedded Derivatives,” Layne determined that the embedded conversion components and other embedded derivatives of the 4.25% Convertible Notes do not require bifurcation and separate accounting. |
The following table presents the carrying value of the 4.25% Convertible Notes: |
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| | January 31, | | | January 31, | | | | | | | | | |
(in thousands) | | 2015 | | | 2014 | | | | | | | | | |
Carrying amount of the equity conversion component | | $ | 11,128 | | | $ | 11,128 | | | | | | | | | |
Principal amount of the 4.25% Convertible Notes | | $ | 125,000 | | | $ | 125,000 | | | | | | | | | |
Unamortized debt discount (1) | | | (14,945 | ) | | | (18,218 | ) | | | | | | | | |
Net carrying amount | | $ | 110,055 | | | $ | 106,782 | | | | | | | | | |
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-1 | As of January 31, 2015, the remaining period over which the unamortized debt discount will be amortized is 45 months using an effective interest rate of 9%. | | | | | | | | | | | | | | | |
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8.0 % Senior Secured Second Lien Convertible Notes |
On March 2, 2015, Layne completed its offering of approximately $100.0 million aggregate principal amount of 8.0% Senior Secured Second Lien Convertible Notes (“8.0% Convertible Notes”). The 8.0% Convertible Notes were offered to certain investors that held approximately $55.5 million of Layne’s 4.25% Convertible Notes due 2018 pursuant to terms in which the investors agreed to (i) exchange the 4.25% Convertible Notes owned by them for approximately $49.9 million of the 8.0% Convertible Notes and (ii) purchase approximately $49.9 million aggregate principal amount of 8.0% Convertible Notes at a cash price equal to the principal amount thereof. The amount of accrued interest on the 4.25% Convertible Notes delivered by the investors in the exchange was credited to the cash purchase price payable by the investors in the purchase. |
The sale of the 8.0% Convertible Notes generated net cash proceeds of approximately $45.0 million after deducting discounts and commissions, estimated offering expenses and accrued interest on the 4.25% Convertible Notes being exchanged. Layne used the net cash proceeds to repay the then outstanding balance on the asset-based facility of $18.2 million with the remainder of the proceeds held for general working capital purposes. |
The 8.0% Convertible Notes were issued pursuant to an Indenture, dated as of March 2, 2015 (the “8.0% Convertible Notes Indenture”), among Layne, the guarantor parties thereto and U.S. Bank National Association, as trustee and collateral agent. The 8.0% Convertible Notes are senior, secured obligations of Layne, with interest payable on May 1 and November 1 of each year, beginning May 1, 2015, at a rate of 8.0% per annum. The 8.0% Convertible Notes will mature on May 1, 2019; provided, however, that, unless all of the 4.25% Convertible Notes (or any permitted refinancing indebtedness in respect thereof) have been redeemed, repurchased, otherwise retired, discharged in accordance with their terms or converted into Layne’s common stock, or have been effectively discharged, in each case on or prior to August 15, 2018 or the scheduled maturity date of the 4.25% Convertible Notes (or any permitted refinancing indebtedness incurred in respect thereof) is extended to a date that is after October 15, 2019, the 8.0% Convertible Notes will mature on August 15, 2018. |
The 8.0% Convertible Notes are Layne’s senior, secured obligations and: |
· | rank senior in right of payment to all of Layne’s existing or future indebtedness that is specifically subordinated to the 8.0% Convertible Notes; | | | | | | | | | | | | | | | |
· | effectively rank senior in right of payment to all of Layne’s existing and future senior, unsecured indebtedness to the extent of the assets securing the 8.0% Convertible Notes, subject to the rights of the holders of the First Priority Liens (as defined below); | | | | | | | | | | | | | | | |
· | are effectively subordinated to any debt of Layne’s foreign subsidiaries; and | | | | | | | | | | | | | | | |
· | are effectively subordinated to any of Layne’s First Priority Debt (as defined below) to the extent of the assets securing such debt. | | | | | | | | | | | | | | | |
The 8.0% Convertible Notes are guaranteed by Layne’s subsidiaries that currently are co-borrowers or guarantors under Layne’s asset-based facility, as well as all of Layne’s future wholly-owned U.S. restricted subsidiaries and, in certain cases, certain other subsidiaries of Layne. Each guarantee of the 8.0% Convertible Notes is the senior, secured obligation of the applicable subsidiary guarantor and: |
· | ranks senior in right of payment to all existing or future indebtedness of that subsidiary guarantor that is specifically subordinated to such guarantee; | | | | | | | | | | | | | | | |
· | effectively ranks senior in right of payment to all existing and future senior, unsecured indebtedness of that subsidiary guarantor to the extent of the assets securing such guarantee, subject to the rights of the holders of the First Priority Liens; and | | | | | | | | | | | | | | | |
· | is effectively subordinated to any First Priority Debt of that subsidiary guarantor to the extent of the assets securing such debt. | | | | | | | | | | | | | | | |
The 8.0% Convertible Notes are secured by a lien on substantially all of the assets of Layne and the subsidiary guarantors, subject to certain exceptions. The liens on the assets securing the 8.0% Convertible Notes are junior in priority to the liens (the “First Priority Liens”) on such assets securing debt (the “First Priority Debt”) of Layne or the subsidiary guarantors under Layne’s asset-based facility and certain other specified existing or future obligations. |
At any time prior to the maturity date, Layne may redeem for cash all, but not less than all, of the 8.0% Convertible Notes; provided, however, that Layne may not redeem the 8.0% Convertible Notes on a redemption date that is outside an Open Redemption Period (as defined below) unless the last reported sale price of Layne’s common stock equals or exceeds 140% of the conversion price of the 8.0% Convertible Notes in effect on each of at least 20 trading days during the 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Layne delivers the redemption notice. |
For these purposes, an “Open Redemption Period” means each of the periods (i) commencing on February 15, 2018 and ending on, and including, August 14, 2018 and (ii) commencing on November 1, 2018 and ending on April 30, 2019. The redemption price will equal 100% of the principal amount of the 8.0% Convertible Notes to be redeemed, plus (i) accrued and unpaid interest, if any, to, but excluding, the applicable redemption date and (ii) if such redemption date is during an Open Redemption Period, an additional payment equal to the present value, as of the redemption date, of the following: |
· | in the case of the Open Redemption Period ending on August 14, 2018, all regularly scheduled interest payments due on the 8.0% Convertible Notes to be redeemed on each interest payment date occurring after the redemption date and on or before August 15, 2018 (assuming, solely for these purposes, that August 15, 2018 were an interest payment date); or | | | | | | | | | | | | | | | |
· | in the case of the Open Redemption Period ending on April 30, 2019, all regularly scheduled interest payments due on the 8.0% Convertible Notes to be redeemed on each interest payment date occurring after the redemption date and on or before May 1, 2019. | | | | | | | | | | | | | | | |
In addition, upon the occurrence of a “fundamental change” (as defined in the Indenture), holders of the 8.0% Convertible Notes will have the right, at their option, to require Layne to repurchase their 8.0% Convertible Notes in cash at a price equal to 100% of the principal amount of the 8.0% Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. |
The 8.0% Convertible Notes are convertible, at the option of the holders, into consideration consisting of shares of Layne’s common stock (and cash in lieu of fractional shares) until the close of business on the scheduled trading day immediately preceding the maturity date. No holder will have the right to convert any 8.0% Convertible Notes into shares of common stock to the extent that the conversion would cause that holder to beneficially own more than 9.9% of the shares of Layne’s common stock then outstanding after giving effect to the proposed conversion. |
The initial conversion rate was 85.4701 shares of Layne’s common stock per $1,000 principal amount of 8.0% Convertible Notes (equivalent to an initial conversion price of approximately $11.70 per share of Layne’s common stock), representing a 40.0% conversion premium over the last reported sale price per share of Layne’s common stock on The NASDAQ Global Select Market on February 4, 2015, the date on which the 8.0% Convertible Notes were priced. The conversion rate is subject to adjustment upon the occurrence of certain events. In addition, Layne may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including Layne’s calling the 8.0% Convertible Notes for redemption. |
The 8.0% Convertible Notes Indenture contains covenants that, among other things, restrict the ability of Layne and its restricted subsidiaries, subject to certain exceptions, to: (1) incur additional indebtedness; (2) create liens; (3) declare or pay dividends on, make distributions with respect to, or purchase or redeem, Layne’s or its restricted subsidiaries equity interests, or make certain payments on subordinated or unsecured indebtedness or make certain investments; (4) enter into certain transactions with affiliates; (5) engage in certain asset sales unless specified conditions are satisfied; and (6) designate certain subsidiaries as unrestricted subsidiaries. The 8.0% Convertible Notes Indenture also contains events of default after the occurrence of which the 8.0% Convertible Notes may be accelerated and become immediately due and payable. |