Hanger, Austin, Texas, filed a form 8-K Current Report with the U.S. Securities and Exchange Commission (SEC) on June 23, stating the following:
- Due to the ongoing preparation and audit of its 2015 and 2016 financial statements, Hanger has entered into amendments to its Term B credit agreement and its credit agreement that, among other things, extends the delivery deadline for those audited financial statements from August 15, 2017, to February 15, 2018. All other obligations and covenants must be complied with. In connection with the entry into the Term B amendment, Hanger will pay an amendment fee of 50 basis points of the outstanding principal amount of the loan held by such consenting lender.
- The company has entered into an amendment to the rights agreement, dated February 28, 2016, to extend the final expiration date to December 31, 2018.
- On June 22, the company entered into a sixth amendment to its original credit agreement, dated June 17, 2013 (in exchange for 50 basis points of the outstanding principal amount held by such consenting lender), that:
o Extends the delivery deadline of the required financial information (as defined in the fifth amendment and waiver) from August 15, 2017, to February 15, 2018.
o Amends the definition of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to provide that the amount of professional fees and expenses that may be added back to consolidated EBITDA (other than certain professional fees and expenses reimbursed by the company and the subsidiary guarantors under the credit agreement in accordance with the second amendment and waiver, the entire aggregate amount of which may be added back) for any four consecutive fiscal quarters shall not exceed, for the period of four consecutive fiscal quarters ending on or prior to (1) March 31, 2016, $30 million; (2) June 30, 2016, $36 million; (3) September 30, 2016, $35 million; (4) December 31, 2016, $31 million; (5) March 31, 2017, $25 million; (6) June 30, $37 million; (7) September 30, $35 million; (8) December 31, $31 million; and (9) March 31, 2018, $25 million; provided that the amounts set forth in (6), (7), (8), and (9) shall be reduced by an amount equal to the amount by which the prior period adjustment period exceeds $815,000.
o Requires Hanger to deliver a certificate with each annual audited and quarterly unaudited financial statement stating the amount of professional fees and expenses incurred from and after March 31 that are to be allocated to any fiscal quarter ended on or prior to March 31 as adjustments in accordance with generally accepted accounting principles of such professional fee and expense amounts previously included within the underlying financial statements provided to the lenders with the company’s compliance certificate relating to the period ended March 31.
o Amends the maximum permitted leverage ratio covenant to be, as of the end of the company’s fiscal quarter ending on (i) June 30, 2016, 5:1, (ii) September 30, 2016, 5.75:1, and (iii) any date thereafter, 5:1. The sixth amendment also amends the minimum interest coverage ratio covenant in the credit agreement to be, as of the end of the company’s fiscal quarter ending (i) on June 30, 2016, 3.5:1, (ii) on September 30, 2016; December 31, 2016; March 31, 2017; June 30, 2017; September 30, 2017; and December 31, 2017, 2.25:1, and (iii) thereafter, 2:1.
If the company fails to deliver the required financial information by June 30, then the interest rate for loans under the credit agreement will increase by 0.5 percent per annum, effective July 1. Upon Hanger delivering the required financial information and achieving a leverage ratio, for its then most recently ended fiscal quarter, of less than or equal to 4:1, the specified margin for borrowings based on the London Interbank Offered Rate (LIBOR) will decrease to 4 percent per annum and the specified margin for borrowings based on the base rate will decrease to 3 percent per annum.
As of May 31, Hanger’s aggregate revolving commitment under the credit agreement was $118.3 million. Of this amount, the company had $20.7 million in limitations, had borrowed $18 million, and had used $6.1 million for letters of credit, resulting in $73.5 million of available borrowing capacity. Additionally, as of May 31, Hanger had $173 million in outstanding borrowings, net of a $1.4 million unamortized discount, under the credit agreements’ term loan facility.