Hanger, Austin, Texas, filed a Current Report on Form 8-K with the Securities and Exchange Commission (SEC) in which it announced the successful solicitation of consents from holders of its $200 million aggregate principal amount 7⅛ percent senior notes due 2018 to amend and waive certain provisions of its indenture, dated November 2, 2010, with Wilmington Trust Company (Wilmington) as trustee. On December 11, 2015, Hanger entered into a supplemental indenture to amend and waive certain provisions of the indenture, which took effect December 15, 2015, upon payment of the initial consent fee of $20 per $1,000 principal amount of the notes for which consents were delivered.
As previously disclosed, Hanger did not timely file with the SEC its annual report for the fiscal year (FY) ended December 31, 2014, and its quarterly reports for the periods ended September 30, 2014, and March 31, June 30, and September 30, 2015. Hanger also anticipated that it would be unable to timely file its annual report for the FY ended December 31, 2015, and said the earliest it will likely commence making its filings with the SEC is the first quarter of 2016.
The supplemental indenture retroactively takes effect November 15, 2015. It amends the reporting covenant in the indenture to extend the company’s deadline to deliver to the note holders and trustee periodic reports required to be filed with the SEC until the earliest of such time as the company is current in its SEC filings, the company fails to timely pay a second consent fee if due on May 15, 2016, and August 31, 2016 (the termination date). It waives through the termination date any default or event of default under the indenture that may occur or exist due to the company’s failure to timely deliver to the holders and trustee, or file with the SEC, its delayed SEC reports. It also results in any default notice relating to the company’s reporting covenant under the indenture becoming null and deemed to have been withdrawn, including the default notice the company received from a single holder who holds greater than 25 percent in aggregate principal amount of the notes issued under the indenture. Additionally, Hanger increased the interest rate on the notes to 9⅛ percent, and if the company is not current in its filing obligations with the SEC as of May 15, 2016, it will increase the interest rate on the notes to 10⅝ percent, effective May 15, 2016.
The supplemental indenture also amends the definition of “permitted liens” in the indenture to limit Hanger’s ability to incur certain secured indebtedness to no more than $375 million, except to refinance the notes, until the company is current in its SEC periodic reporting obligations.
Additionally, the supplemental indenture amends the indenture to obligate Hanger, until it is current in its filing obligations with the SEC, to provide within 40 days after the end of a fiscal quarter and 60 days after the end of a FY certain unaudited cash flows and other data in a form substantially consistent with the information the company previously provided in its Current Report on Form 8-K dated November 12, 2015 (each, a cash flow report). If Hanger fails to timely file or furnish a cash flow report by the deadline, and if it shall not have filed such cash flow report within 15 days after such deadline, then the company shall be required to pay additional interest on the notes on the next succeeding interest payment date, which shall be calculated by multiplying the aggregate outstanding principal amount of the notes held by such holder on the related record date by ½ percent. The additional interest payment shall be $5 per $1,000 in aggregate principal amount of notes. The company’s failure to file or furnish with the SEC such cash flow report shall not be a default or event of default under the indenture, and the holders’ sole remedy is the payment of any applicable additional interest.
Further, the supplemental indenture also results in the withdrawal of the notice of default pursuant to the terms of the company’s bank credit agreement with Bank of America.
