WASHINGTON, D.C. 20549
Item 1.01 Entry into a Material Definitive Agreement.
Purchase Agreement
On
September 17, 2020, Alliance Data Systems Corporation, as the issuer (
“Alliance Data” or the
"Company"), and certain of its
subsidiaries,
as guarantors (the
"Closing Date Guarantors"), entered into a purchase agreement (the
"Purchase Agreement") with BofA Securities, Inc., as the representative of the initial purchasers named in the Purchase Agreement (the
"Initial Purchasers"),
under which
the Company agreed to sell $500 million aggregate principal amount of its 7.000% senior notes due 2026 (the
"Notes") to the Initial Purchasers.
The Company and the Closing Date Guarantors have agreed to indemnify the Initial
Purchasers against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments the Initial Purchasers may be required to make because of any such liabilities. The
offering of the Notes closed on
September 22, 2020. The description of the Purchase Agreement herein is qualified in its entirety by reference to the full text of such Purchase Agreement, a copy of which is attached hereto as
Exhibit 10.1 and
incorporated by reference herein.
The Notes are governed by an
indenture (the
"Indenture") dated as of
September 22, 2020 among
the Company, the Closing Date Guarantors, and MUFG Union Bank,
N.A., as trustee. Pursuant to the
Indenture, interest on the Notes will accrue at a rate of 7.000% per annum on the principal amount from
September 22, 2020, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on
March 15, 2021. The Notes will mature on
January 15, 2026, subject to earlier repurchase or redemption.
Guarantees
The Notes are guaranteed on a senior unsecured basis by each of
the Company's existing and future domestic restricted
subsidiaries that incurs or in any other
manner becomes liable for any debt under
the Company’s domestic credit facilities, including the 2017 Credit Agreement (as defined below) (the
"Guarantors"), which, on the date of issuance of the Notes, were the Closing Date Guarantors.
Ranking
The Notes rank equally in right of payment to
the Company's existing and future senior unsecured debt, including
the Company’s outstanding 4.750% senior notes
due 2024 in the aggregate principal amount of $850 million issued on
December 20, 2019 (the
“2024 Notes”) and the debt under the 2017 Credit Agreement, and senior in right of payment to any future debt that is by its terms expressly subordinated
to the Notes. The guarantees rank equally in right of payment to all of the Guarantors' existing and future senior unsecured debt, including their guarantees of the 2024 Notes and the debt under the 2017 Credit Agreement, and senior in right of
payment to any existing and future debt that is expressly subordinated in right of payment to the guarantees. The Notes and the guarantees are effectively subordinated to
the Company's and the Guarantors' secured debt to the extent of the value
of the assets securing such debt. The Notes and the guarantees are structurally subordinated to all existing and future liabilities (including trade payables) of
the Company's
subsidiaries that do not guarantee the Notes. The Notes rank senior to
any Series A Preferred Stock of
the Company issued under
the Company’s Certificate of Designations of Series A Non-Voting Convertible Preferred Stock with respect to rights upon liquidation, winding up and dissolution.
Optional Redemption
The Company may redeem some or all of the Notes at any time on or after
September 15, 2022 at the redemption prices listed in the
Indenture, plus accrued and
unpaid interest, if any, to, but not including, the applicable redemption date. Prior to
September 15, 2022,
the Company may redeem some or all of the Notes at any time at a redemption price of 100% of the principal amount, plus accrued and
unpaid interest, if any, to, but not including, the applicable redemption date, plus a
"make-whole" premium. In addition, at any time prior to
September 15, 2022,
the Company may, with an amount equal to the net cash proceeds of one or more
qualified equity offerings, as defined in the
Indenture, redeem up to 40% of the aggregate principal amount of the outstanding Notes at a redemption price equal to 107.000% of the principal amount of the Notes, plus accrued and unpaid interest,
if any, to, but not including, the applicable redemption date, provided that such redemption occurs within 90 days following the closing of such qualified equity offering and at least 50% of the aggregate principal amount of the Notes originally
issued under the
Indenture remain outstanding immediately following such redemption.
Change of Control; Mandatory Offer to Repurchase Following Certain Asset Sales
Upon the occurrence of certain kinds of changes of control,
the Company must offer to purchase the Notes at 101% of their principal amount, plus accrued and
unpaid interest, if any, to, but excluding, the date of purchase. If, within 365 days after the sale of certain assets of
the Company or its restricted
subsidiaries, as defined in the
Indenture,
the Company does not either repay certain debt or
reinvest the excess proceeds of such asset sales as set forth in the
Indenture, under certain circumstances
the Company must offer to use such excess proceeds to repurchase the Notes on the terms set forth in the
Indenture.
Covenants
The
Indenture contains covenants that limit, among other things,
the Company's ability and the ability of some of its
subsidiaries to (i) incur additional debt,
(ii) declare or pay dividends, redeem stock or make other distributions to stockholders, (iii) make investments, (iv) create liens or use assets as security in other transactions, (v) merge or consolidate, or sell, transfer, lease or dispose of
substantially all of
the Company's assets, (vi) enter into transactions with affiliates, (vii) sell or transfer certain assets and (viii) enter into any consensual encumbrance or restriction on the ability of certain of
the Company's
subsidiaries
to pay dividends or make loans or sell assets to
the Company. The covenants are subject to a number of important qualifications, exceptions and limitations.
Events of Default
The
Indenture includes customary events of default, including, among other things, payment default, covenant default, certain defaults under other indebtedness
of
the Company or certain of its
subsidiaries, the failure to timely satisfy judgments over a certain sum against
the Company or certain of its
subsidiaries, and bankruptcy, insolvency or reorganization affecting
the Company or certain of its
subsidiaries.
No Registration Rights
The Company will not file a registration statement for the resale of the Notes. As a result, holders may only resell the Notes pursuant to an exemption from the
registration requirements of the Securities Act, to the extent available, and other applicable securities laws. The Notes and the guarantees (together, the
"Securities") have not been, and will not be, registered under the Securities Act. The
Company offered and sold the Securities to the Initial Purchasers in reliance on the exemption from registration requirements provided by Section 4(a)(2) of the Securities Act.
The Company relied on this exemption from registration requirements
in part based on representations made by the Initial Purchasers in the Purchase Agreement. The Initial Purchasers then sold the Securities to qualified institutional buyers pursuant to exemptions from registration requirements provided by Rule
144A and Regulation S under the Securities Act.
Use of Proceeds
After deducting the fees payable to the Initial Purchasers and the estimated offering expenses, the net proceeds to
the Company from the
offering of Notes are estimated to be approximately $493.0 million.
The Company used the net proceeds from the offering and other funds to repay $493.75 million of the outstanding indebtedness under the term loans provided for in the 2017 Credit
Agreement.
This Current Report on Form 8-K does not constitute an offer to sell nor a solicitation of an offer to buy any security and shall not constitute an offer,
solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful.
Some of the Initial Purchasers and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the
ordinary course of business to
the Company, the Guarantors and certain of their affiliates, for which they have received, and may in the future receive, customary fees and commissions. Affiliates of certain of the Initial Purchasers are lenders
and/or agents under the 2017 Credit Agreement and will receive their pro rata portion of the net proceeds from the offering of the Notes and other funds that will be used to repay $493.75 million of the outstanding indebtedness under the term
loans provided for in the 2017 Credit Agreement. MUFG Union Bank, N.A. is acting as trustee under the
Indenture and is an affiliate of MUFG Securities Americas Inc., an Initial Purchaser. Further, certain of the Initial Purchasers (or certain of
their affiliates thereof) may be our customers under customary contractual arrangements from time to time.
Sixth Amendment to Amended and Restated Credit Agreement
On
September 22, 2020,
the Company and the Closing Date Guarantors entered into a Sixth Amendment to Amended and Restated Credit Agreement
with Wells Fargo Bank, National Association (
“Wells Fargo”), as administrative agent, and the lenders party thereto (the
“Sixth Amendment”), which amended the Amended and Restated Credit Agreement dated as of
June 14, 2017, among
the Company, the
Closing Date Guarantors, Wells Fargo and the various agents and lenders party thereto (as amended, supplemented or otherwise modified prior to the Sixth Amendment, the
“2017 Credit Agreement”) to (a) increase the maximum total leverage ratio from
3.50 to 1:00 to (i) 4.50 to 1:00 for the four consecutive fiscal quarters ending
March 31, 2021,
June 30, 2021,
September 30, 2021, and
December 31, 2021 and (ii) 4.00 to 1.00 for the four consecutive fiscal quarters ending
March 31, 2022 and
June 30, 2022, (b) decrease the minimum interest coverage ratio from 4.50 to 1.00 to (i) 4.00 to 1.00 for the four consecutive fiscal quarters ending
March 31, 2021,
June 30, 2021,
September 30, 2021, and
December 31, 2021 and (ii) 4.25 to 1.00
for the four consecutive fiscal quarters ending
March 31, 2022 and
June 30, 2022, and (c) increase the maximum permitted average delinquency ratios for Comenity Bank from 4.50% to (i) 6.50% for the three consecutive calendar months ending
March
31, 2021,
June 30, 2021,
September 30, 2021, and
December 31, 2021 and (ii) 5.50% for the three consecutive calendar months ending
March 31, 2022 and
June 30, 2022, and to make certain other amendments. The Sixth Amendment also required the
Company to prepay the term loans under the 2017 Credit Agreement upon consummation of the offering of the Notes with a prepayment in an amount equal to the net proceeds from the offering of the Notes.
The description of the Sixth Amendment herein is qualified in its entirety by reference to the full text of such Sixth Amendment, a copy of which is attached as
Exhibit 10.2 hereto and
incorporated by reference herein.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Item 2.04 Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement.
The information set forth in Item 1.01 above with respect to
the Company’s obligation to prepay the term loans under the 2017 Credit Agreement in amount equal
to the net proceeds from the offering of the Notes is
incorporated herein by reference.
Item 3.03 Material Modification to Rights of Security Holders.
Item 9.01 Financial Statements and Exhibits.
