Hanger, Austin, Texas, filed a Current Report on Form 8-K with the U.S. Securities and Exchange Commission (SEC) on November 30 stating that it received a default notice on November 25 from Wilmington Trust Company (Wilmington). Wilmington holds greater than 25 percent in aggregate principal amount of the company’s 7⅛ percent senior notes due 2018. The default notice was issued in connection Hanger’s failure to comply with the financial reporting covenant under the indenture dated November 2, 2010, and amended November 25, by and between Hanger and Wilmington, as trustee.
As previously disclosed, Hanger did not timely file with the SEC its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and its Quarterly Reports on Form 10-Q for the periods ended September 30, 2014; March 31; June 30; and September 30. Under the indenture, Hanger has 90-days from the date of the notice to cure the default relating to the delayed SEC reports. At that time, and unless the notice of default is deemed to be null and void through the approval of the Proposed Amendment and Waiver or otherwise before the expiration of the 90-day grace period, Wilmington or the holders of not less than 25 percent in aggregate principal amount of the notes may declare all amounts on the notes to be due and payable immediately. As of the notice date, there was $200 million in aggregate principal amount of notes outstanding.
Further, Hanger’s bank credit agreement, dated June 17, 2013, with Bank of America as agent, contains cross-default provisions relating to the notes. Thus, the default notice constitutes an event of default. If an event of default exists under the Credit Agreement, the lenders may accelerate the company’s borrowings, which included $146.3 million under the revolving portion of the credit agreement and $203.9 million under the term loan portion of the Credit Agreement as of November 25. However, the default notice shall not constitute an event of default under the bank credit agreement if it is withdrawn (and not reinstated) within 30 days after its receipt.
Additionally, on November 30, Hanger announced the amendment and restatement of the terms of its consent solicitation relating to the 7⅛ percent notes to amend, among other things, the consent fees payable pursuant to the consent solicitation, the proposed increased interest rate on the notes, and the expiration date of the consent solicitation. Approval of noteholders of the proposed amendment and waiver pursuant to the terms of the consent solicitation will nullify and void the default notice and will also result in the withdrawal of the default notice pursuant to the terms of the credit agreement. The consent solicitation expires December 9, 2015.
The company said that if it is unable to come to satisfactory resolution with the lenders under its credit agreement or the holders of its notes and were to face acceleration of its outstanding debt, then it would need to seek alternative financing. However, this alternative financing may not be available to the company on terms that are favorable to it, or at all, according to the announcement.
