SEC Filings
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| 10-Q | |
| HRG GROUP, INC. filed this Form 10-Q on 05/09/2016 | |
| Entire Document | |
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Compass As of March 31, 2016, Compass had $160.0 of outstanding indebtedness under the Compass Credit Agreement. The borrowing base is redetermined semi-annually, with Compass and the lenders having the right to request interim unscheduled redeterminations in certain circumstances. The interest rate grid ranges from LIBOR plus 269 bps to 369 bps (or Alternate Base Rate (“ABR”) plus 475 bps to 575 bps), depending on the percentages of drawn balances to the borrowing base as defined in the agreement. On March 31, 2016, the one month LIBOR was 0.4% which resulted in an interest rate of approximately 3.7%. On November 13, 2015, Compass entered into an amendment to the terms of the Compass Credit Agreement that included a modification of the Compass’ Consolidated Leverage Ratio (as defined in the Compass Credit Agreement) whereby the maximum permitted ratio at the end of each quarter was increased to 6.00 to 1.0 through September 30, 2016. The maximum permitted Consolidated Coverage Ratio for each quarter ending after October 1, 2016 will be 4.50 to 1.00. The amendment also provided for the reduction of the borrowing base to $320.0 on November 13, 2015. Following the completion of the Compass Asset Sale and pay down of Compass indebtedness, the borrowing base under the Compass Credit Agreement was further reduced to $175.0. Concurrently with such amendment, HRG’s wholly-owned subsidiary, HGI Funding, LLC (“HGI Funding”), determined to amend its guarantee in order to continue to provide a guarantee (the “Initial Guarantee”) of a limited portion of the debt under the Compass Credit Agreement until the date of Compass’ next borrowing base redetermination (expected to be on or about May 16, 2016) and committed to make a debt or equity contribution to Compass on the date of such redetermination in an amount to be determined based on the amount of the borrowing base at such time. HGI Funding’s aggregate obligations in connection with the Initial Guarantee through the May 2016 borrowing base redetermination date are not to exceed $30.0. The guarantee was also amended to provide that HGI Funding may elect to guaranty an additional portion of the debt under the Compass Credit Agreement (the “Optional Guarantee”) in order to cure defaults under the Consolidated Leverage Ratio on any test date through September 30, 2016. HGI Funding will be required to make a debt or equity contribution to Compass in the amount of the Optional Guarantee (if any) within eleven business days of the delivery of Compass' compliance certificate under the Compass Credit Agreement for the period ending September 30, 2016. The secured amount is secured by a pledge of assets chosen by the Company that may consist of a combination of cash and marketable securities with a determined value equal to the maximum secured amount then applicable. In measuring the determined value of the pledged assets, cash is valued at 100.0% and marketable securities are valued at 33.3% of fair market value thereafter (measured as the 20 day average close price of such marketable securities). As of March 31, 2016, the Company had no amounts in the Optional Guarantee. As of March 31, 2016, $160.0 was drawn under the Compass Credit Agreement. The Compass Credit Agreement matures on February 14, 2018. On December 23, 2015, Compass received the consent of the lenders under the Compass Credit Agreement to delay the delivery of Compass’ unqualified audited financial statements for the fiscal year ending September 30, 2015 until March 31, 2016. Such financial statements had previously been required to be delivered within 90 days following the end of such fiscal year. On March 29, 2016, Compass entered into a further amendment to the terms of the Compass Credit Agreement that included a modification of the Applicable Spread (as defined in the Compass Credit Agreement) whereby (i) the ABR Spread (as defined in the Compass Credit Agreement) was increased from a range of 0.75%-1.75%, based on the Borrowing Base Usage (as defined in the Compass Credit Agreement), to a spread of 1.25%-2.25% and (ii) the Eurodollar spread was increased from a range of 1.75%-2.75% to a range of 2.25%-3.25%. Additionally, the commitment fee was raised to 0.50% at all Borrowing Base Usage levels, up from 0.375% when the Borrowing Base Usage was less than 50.0%. The amendment further provided for a redetermination of Compass’ borrowing base on or about May 16, 2016 with scheduled redeterminations to begin December 1, 2016 and proceed every June 1 and December 1 thereafter. Finally, the amendment included a limited waiver of the event of default that would have occurred due to the existence of a going concern qualification in the audited consolidated financial statements of Compass for the fiscal year ended September 30, 2015. As of March 31, 2016, Compass was in good standing under the covenants specified in the Compass Credit Agreement, as amended. The expiration date of the Initial Guarantee occurs upon the closing of Compass’ scheduled borrowing base redetermination on or about May 16, 2016. The expiration date of the Optional Guarantee occurs upon the making of all required payments on the Optional Guarantee payment date. Compass is presently current on all obligations related to the Compass Credit Agreement. HGI Energy In February 2013, in connection with the Company’s acquisition of an interest in Compass, HGI Energy entered into note purchase agreements, one of which was with FGL for $50.0 notional aggregate principal amount due February 14, 2021 (the “HGI Energy Note to FGL”). The HGI Energy Note to FGL earns interest at 9.0% per annum, payable semi-annually in arrears on January 1 and July 1. The HGI Energy Note to FGL is subordinated in seniority to the Compass Credit Agreement. Salus Salus acts as co-lender under some of the asset-based loans that it originates, and such loans are structured to meet the definition of a “participating interest” as defined under ASC 860-10, Transfers and Servicing. For loans originated with co-lenders that have terms that result in such a co-lender not having a qualifying “participating interest”, Salus recognizes the whole, undivided loan. 28 | |
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