| Item 1.01. | Entry Into a Material Agreement. |
Third Amended and Restated Credit Agreement
On September 28, 2022, ScanSource, Inc. amended and restated its credit facility that includes (i) a five-year, $350 million multicurrency senior secured revolving credit facility and (ii) a five-year $150 million senior secured term loan facility. The former credit facility provided (x) $350 million of revolving capacity that was scheduled to expire on April 30, 2024, and (y) a term loan which had an outstanding principal balance of $131.25 million that was also scheduled to mature on April 30, 2024.
In addition, pursuant to an “accordion feature,” the Company may increase its borrowings by up to an additional $250 million, for a total of up to $750 million, subject to obtaining additional credit commitments from the lenders participating in the increase.
Loans denominated in U.S. dollars, other than swingline loans, shall bear interest at a rate per annum equal to, at the Company’s option, (i) the adjusted Term SOFR or daily simple SOFR rate plus an additional margin ranging from 1.00% to 1.75%, depending upon the Company’s ratio of (A) total consolidated debt less up to $30 million of unrestricted domestic cash to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as applicable, for which financial statements have been delivered to the Lenders (the “leverage ratio”); or (ii) the alternate base rate plus an additional margin ranging from 0% to 0.75%, depending upon the Company’s leverage ratio, plus, if applicable, certain mandatory costs. Loans denominated in foreign currencies shall bear interest at a rate per annum equal to the applicable benchmark rate set forth in the New Credit Agreement (as defined herein) plus an additional margin ranging from 1.00% to 1.75%, depending upon the Company’s leverage ratio, plus, if applicable, certain mandatory costs. All swingline loans denominated in U.S. dollars shall bear interest based upon the adjusted daily simple SOFR, floating daily, plus an additional margin ranging from 1.00% to 1.75%, depending upon the Company’s leverage ratio, or such other rate as the Company and the applicable swingline lender may agree. The New Credit Agreement contains customary yield protection provisions.
The New Credit Agreement includes customary representations, warranties, and affirmative and negative covenants, including financial covenants. Specifically, the Company’s leverage ratio must be less than or equal to 3.50 to 1.00. In addition, the Company’s Interest Coverage Ratio (as such term is defined in the New Credit Agreement) must be at least 3.00:1.00 as of the end of each fiscal quarter. In the event of a default, customary remedies are available to the Lenders, including acceleration and increased interest rates. As was the case with the former credit facility, the New Credit Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries.
The foregoing description is qualified by reference to the Third Amended and Restated Credit Agreement, dated September 28, 2022, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders named therein, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference (the “New Credit Agreement”).
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The disclosures set forth under Item 1.01 are incorporated herein by reference into this Item 2.03.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
