Hanger Inc. recently filed an 8-K form reporting an agreement to modification of a credit agreement dated June 17, 2013. The same agreement, with Bank of America, was previously amended June 19, 2015.
The new agreement was negotiated between parties after Hanger failed to deliver certain financial information and other materials for periods that ended Sept. 30, 2014, Dec. 31, 2014, March 31, 2015 and June 30, 2015 as required by the amendment filed in June of this year.
The new agreement waives the event of default under the credit agreement arising from Hanger’s failure to deliver the financial information to the bank and the failure by the company to timely deliver the notice required by the credit agreement with respect to its failure to deliver said financial information.
The financial information in question includes: annual and quarterly financial information demonstrating Hanger’s compliance with the financial covenants in the credit agreement for the fiscal quarters that ended Sept. 30, 2014, Dec. 31, 2014, March 31, 2015 and June 30, 2015; and projections for each fiscal quarter remaining during the term of the credit agreement, through June 17, 2018, demonstrating that Hanger will be in compliance with the credit agreement’s financial covenants as of the end of each fiscal quarter remaining during the term of the credit agreement.
The new agreement provides that a failure by Hanger to deliver the financial information to the bank on or before Oct. 30, 2015, will be an additional event of default under the credit agreement. Additionally, it stipulates that until Hanger delivers the information, the amount it can borrow under the credit agreement has been reduced from $200 million to $146.3 million and “certain baskets and exceptions to restrictive covenants” in the credit agreement have been reduced or eliminated.
The new agreement also permanently amends the definition of consolidated EBITDA in the credit agreement to allow Hanger to include the entire aggregate amount of professional fees and expenses reimbursed by Hanger and the subsidiary guarantors under the credit agreement to its calculation of consolidated EBITDA.
The 8-K form noted that as of Sept. 11, 2015, Hanger had $146.3 million drawn on the revolving credit line, including outstanding letters of credit. The company also had $59.5 million of cash on hand. The form stated Hanger “believes it has sufficient liquidity to meet operating needs and planned capital expenditures through the remainder of the year.”
The form also stated Hanger will pay the bank for the account of each consenting lender an amendment fee in an amount equal to five basis points of the outstanding principal amount on the term loan held by such consenting lender, as well as the amount of such lender’s revolving commitments.