Hanger, Austin, Texas, announced that on August 1 it took several actions to refinance its debt structure, including entering into a new Term B credit agreement for a $280 million senior unsecured term loan, issuing a redemption notification to the holders of its outstanding 10.625 percent senior notes due 2018, and entering into a fifth amendment and waiver to further modify and extend waivers under its credit agreement. The details of these actions are outlined in a Current Report Form 8-K that Hanger filed with the U.S. Securities and Exchange Commission on August 2, and are summarized below.
Term B Credit Agreement
The credit agreement with Wilmington Trust, National Association, as administrative agent, provides for a $280 million senior unsecured loan at a fixed rate per annum of 11.5 percent payable quarterly in arrears, and contains customary events of default. All outstanding principal is due at maturity on August 1, 2019. The funds may be prepaid in whole or in part at any time, subject to fees as stipulated in the agreement. These funds must be used to redeem all of the outstanding notes, to repay a portion of the revolving borrowings under the company’s existing credit agreement, to pay fees and expenses in connection with the foregoing actions, and for working capital and general corporate purposes.
Notice of Redemption for 10.625 Percent Senior Notes due 2018
The Term B credit agreement requires Hanger to use the loan proceeds to redeem all of its outstanding notes. The aggregate redemption price for the notes will be about $203.6 million, plus accrued and unpaid interest through the redemption date, and is expected to occur on August 31.
Credit Agreement Amendment and Waiver
On July 15, Hanger entered into a fifth amendment and waiver agreement, effective August 1, that modified its original credit agreement dated June 17, 2013, with Bank of America, as agent. This agreement waives defaults and events of default under the credit agreement and also modifies certain terms and covenants, including increasing the interest rates.
The fifth amendment and waiver was negotiated in connection with, among other things, the company’s failure to deliver to the lenders certain financial information and other materials for the periods ended September 30, 2014, through March 31, and for its failure to comply with the leverage ratio for the quarter ended March 31. Hanger’s failure to deliver the required financial information to the agent on or before August 15, 2017, shall be an additional event of default.
In addition, the fifth amendment and waiver permanently reduces the aggregate revolving commitment under the credit agreement from $200 million to $135.3 million. Fifty percent of federal income tax refunds the company may receive for the tax year 2015 or earlier will be applied as a further permanent reduction of the aggregate revolving commitment, except that, in no event shall the commitment be reduced to less than $108 million. Further, the company must maintain minimum liquidity of $10 million.
“This new loan allows us to refinance our debt…and reducing borrowings under our revolving bank loan. It also provides working capital and gives us more flexibility as we work to complete our financial statements and file our annual reports,” said Hanger President and CEO Vinit Asar. “While we continue to assess the time needed to prepare and file our financial statements in light of the extensive review we have undertaken, we remain focused and committed to working as quickly as possible. Currently, we do not expect to commence filing before December of 2016.”