Colfax obtains $3.03 billion credit agreement at Libor plus 175 bps

By Sarah Lizee

Olympia, Wash., Dec. 18 – Colfax Corp. entered into a credit agreement on Monday with JPMorgan Chase Bank, NA as administrative agent, providing for a $1.3 billion revolving credit facility, a $1,225,000,000 term loan A-1 and a $500 million term loan A-2, according to an 8-K filing with the Securities and Exchange Commission.

Interest is Libor plus an initial margin of 175 basis points. The margin will range from 125 bps to 200 bps, depending on the total leverage ratio or the corporate family rating of the company, depending on which results in the lower applicable interest rate margin.

The commitment fee on the revolver ranges from 15 bps to 25 bps and is initially 35 bps.

The revolver and term loan A-1 mature in five years. The term loan A-2 matures in two years.

The revolver contains a $50 million swingline loan sub-facility.

The initial credit extensions will be made available on the date of the company’s acquisition of DJO Global, Inc., subject to some conditions. The proceeds will be used on that date to refinance the company’s credit agreement dated as of June 5, 2015, to pay a portion of the consideration of the acquisition, to redeem some outstanding debt at DJO and for related fees and expenses.

The acquisition is expected to be completed in the first quarter of 2019.

Following the acquisition, revolver borrowings will be used for working capital and general corporate purposes.

Financial covenants require the company to maintain a maximum total leverage ratio of 6 to 1, with a step-down to 5.5 to 1 at the end of the second and third fiscal quarters following the acquisition of DJO, 4.75 to 1 at the end of the fourth and fifth fiscal quarters, 4.25 to 1 at the end of the sixth fiscal quarter, 4 to 1 at the end of the seventh fiscal quarter and 3.5 to 1 at the end of the eighth fiscal quarter, as well as a minimum interest coverage ratio of 3 to 1.

The credit agreement also contains a springing collateral provision, which will require the obligations under the credit agreement to be secured by substantially all personal property of the company and its U.S. subsidiaries within an agreed period of time if the company’s total leverage ratio under the credit agreement is greater than or equal to 3.75 to 1 for two consecutive fiscal quarters following the fourth fiscal quarter ending after the acquisition of DJO.

JPMorgan, Credit Suisse Loan Funding LLC, Citizens Bank, NA, BNP Paribas, Barclays Bank plc, HSBC Bank USA, NA, Goldman Sachs Bank USA and Citigroup Global Markets Inc. are joint bookrunners and joint lead arrangers. Credit Suisse is the syndication agent. Citizens Bank, BNP, Barclays, HSBC, Goldman, Citigroup, TD Bank, NA, Bank of Nova Scotia, MUFG Bank, Ltd. BMO Capital Markets Corp., RBC Capital Markets, Sumitomo Mitsui Banking Corp. and Bank of America, NA are co-documentation agents.

Colfax is an Annapolis Junction, Md.-based diversified technology company.

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