Item 1.01. Entry into a Material Definitive Agreement.
On May 1, 2020, Colfax Corporation (the “Company”) entered into Amendment No. 3 (the “Amendment”) to the credit agreement, dated as of December 17, 2018, and as amended on September 25, 2019 and December 6, 2019 (the “Credit Agreement”), by and among the Company, as the borrower, certain U.S. subsidiaries of the Company identified therein, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citizens Bank, N.A., as syndication agent, and the co-documentation agents named therein.
The Amendment, among other changes, modifies the total leverage ratio by permitting the Company to deduct (subject to certain exceptions) up to $125 million of unrestricted cash and cash equivalents from the debt component of the ratio and by increasing the maximum total leverage ratio to 5.75:1.00 as of June 30, 2020, 6.50:1.00 as of each fiscal quarter thereafter until March 31, 2021, 5.25:1.00 for the quarter ending June 30, 2021, 4.50:1.00 for the quarter ending September 30, 2021, 4.25:1.00 for the quarter ending December 31, 2021 and March 30, 2022, 4.00:1.00 for the quarter ending June 30, 2022 and September 30, 2022, and 3.50:1.00 as of December 31, 2022 and for each fiscal quarter ending thereafter.
The Amendment also decreases the interest coverage ratio from 3.00:1.00 for the quarter ending June 30, 2020 to 2.75:1.00 for each of the fiscal quarters ending September 30, 2020 until June 30, 2021, and then increases it back to 3.00:1.00 for the quarter ending September 30, 2021 and thereafter.
The Amendment contains a “springing” collateral provision (based upon the Gross Leverage Ratio as defined in the Amendment) which requires the obligations under the Credit Agreement to be secured by substantially all personal property of Colfax and its U.S. subsidiaries and the equity of its first tier foreign subsidiaries, subject to customary exceptions, in the event the Company’s Gross Leverage Ratio is greater than 5.00:1.00 as of the last day of any fiscal quarter. Security would be released in the event the Company’s Gross Leverage Ratio is less than, or equal to, 5.00:1:00 as of the last day of any fiscal quarter.
Lastly, the Amendment adds a fifth pricing tier in the event the total leverage ratio is greater than 4.50:1.00 (regardless of the corporate family rating), with pricing at 2.50%, in the case of the Eurocurrency margin and 1.50%, in the case of the base rate margin, and 0.50% when undrawn. In the event the total leverage ratio is less than 4.50:1.00, pricing would continue to be based on the rates set forth in the existing pricing tiers in the Credit Agreement, as applicable.
The total commitment under the Credit Agreement, consisting of a $975 revolving credit facility with a $50 million swing line loan sub-facility and a $825 million Term A-1 loan, remains unchanged, as does the maturity date of December 6, 2024.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is attached hereto as Exhibit 10.1.