Annual report pursuant to Section 13 and 15(d)

Note 15 - Subsequent Events

v3.21.1
Note 15 - Subsequent Events
 12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Subsequent Events [Text Block]
15.
       
Subsequent Events
 
Acquisition
 
On
February 3, 2021,
the Company announced that it had acquired FilAMed, a privately held biomedical services company based in Bakersfield, California, for an approximate purchase price of
$1.4
million.  The initial accounting for the business combination, including the estimated fair value of the assets and liabilities acquired, is incomplete as a result of the timing of the acquisition. This acquisition will supplement the Company's existing biomedical recertification, maintenance and repair services for acute care facilities and other alternate site settings including home care and home infusion providers, skilled nursing facilities, pain centers and others.
 
Credit Agreement
 
On
February 5, 2021,
the Company entered into a Credit Agreement (the
“2021
Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”), sole bookrunner and sole lead arranger, and the lenders party thereto. The borrowers under the
2021
Credit Agreement are the Company, InfuSystem Holdings USA, Inc. (“Holdings”), ISI, First Biomedical, , and IFC LLC (“IFC” and, collectively with the Company, Holdings, ISI and First Biomedical, the “Borrowers”).
 
The
2021
Credit Agreement provides for a revolving credit facility (the “Revolving Facility”) of
$75
million, maturing on
February 5, 2026.
The Revolving Facility
may
be increased by
$25
million, subject to certain conditions, including the consent of the Agent and obtaining necessary commitments. The lenders under the
2021
Credit Agreement
may
issue up to
$7
million in letters of credit subject to the satisfaction of certain conditions. On
February 5, 2021,
the Borrowers made an initial borrowing of
$30
million under the Revolving Facility. Proceeds from the loan, along with approximately
$8.2
million in cash, were used to repay all amounts due under the Company's existing credit facility dated
March 23, 2015 (
the
“2015
Credit Agreement”).
 
Amounts outstanding under the Revolving Facility bear interest at a variable rate equal to, at the Company's election, a LIBO Rate for Eurodollar loans or an Alternate Base Rate for ABR loans, as defined by the
2021
Credit Agreement, plus a spread that will vary depending upon the Company's leverage ratio. The spread ranges from
2.00%
to
3.00%
for Eurodollar Loans and
1.00%
to
2.00%
for base rate loans. The initial spread under the
2021
Credit Agreement is
2.00%
for Eurodollar loans and
1.00%
for ABR loans.
 
The
2021
Credit Agreement has customary representations and warranties, and the ability to borrow under the facility is subject to ongoing compliance with a number of customary affirmative and negative covenants, including limitations on indebtedness, liens, mergers, acquisitions, investments, asset sales, affiliate transactions and restricted payments, as well as financial covenants, including the following:
 
 
●
a minimum fixed charge coverage ratio (defined as the ratio of consolidated EBITDA (as defined in the
2021
Credit Agreement) less
50%
of depreciation expense), to consolidated fixed charges (as defined in the
2021
Credit Agreement)) for the prior
four
most recently ended calendar quarters of
1.20
to
1.00;
and
 
●
a maximum leverage ratio (defined as total indebtedness to EBITDA for the prior
four
most recently ended calendar quarters) of
3.50
to
1.00.
 
The
2021
Credit Agreement includes customary events of default, and the occurrence of an event of default will permit the lenders to terminate commitments to lend under the Revolving Facility and accelerate payment of all amounts outstanding thereunder.
 
Pledge and Security Agreement
 
Simultaneous with the execution of the
2021
Credit Agreement, the Company entered into a Pledge and Security Agreement to secure repayment of the obligations of the Borrowers. Under the Pledge and Security Agreement, each Borrower has granted to the Agent, for the benefit of various secured parties, a
first
priority security interest in substantially all of the personal property assets of each of the Borrowers, including the shares of each of Holdings, ISI and First Biomedical and the equity interests of IFC.
 
2015
Credit Agreement
 
On
February 5, 2020,
in connection with the execution and closing of the
2021
Credit Agreement, the Company, along with its wholly owned subsidiaries as borrowers, terminated the
2015
Credit Agreement. All outstanding loans under the
2015
Credit Agreement have been repaid and all liens under the
2015
Credit Agreement have been released, except that a letter of credit originally issued under the
2015
Credit Agreement in the amount of approximately
$0.8
million was transferred to the
2021
Credit Agreement.