Healthways amends credit agreement in light of pending litigation

By Jennifer Chiou

New York, Dec. 30 – Healthways, Inc. entered into an amendment to its credit agreement with SunTrust Bank as administrative agent and the swingline lender, according to an 8-K filing with the Securities and Exchange Commission.

The company said it believed it was prudent to enter into the amendment due to pending legal proceedings, including a contractual dispute with Plastipak Packaging, Inc. The trial is set for Jan. 26.

Specifically, the amendment excludes from the calculation of consolidated EBITDA for any period that includes a fiscal quarter ending on or before Dec. 31, 2015, up to $5 million of accounting charges attributable to the settlement or other satisfaction of litigation liabilities.

In connection with the trial, the parties have reached an agreement in principle to waive their respective rights to a jury trial and to stipulate that the judge will render a judgment in favor of Plastipak of no less than $3 million and no more than $14 million upon conclusion of the trial, the filing stated. As a result, Healthways established in the fourth quarter of 2014 an accrued liability related to the Plastipak proceeding in the amount of $3 million.

Healthways noted in the 8-K that it intends to vigorously defend itself at trial, but no assurance can be given that the ultimate liability in the case will not exceed the $3 million accrued liability.

In addition, the credit agreement amendment changes, among other things, to provide the following:

• Net cash proceeds from asset sales and recovery events aggregating in excess of $10 million in any fiscal year must be deposited in a deposit account maintained with or subject to a control agreement in favor of the administrative agent pending reinvestment;

• The maximum amount of incremental (accordion) indebtedness under the agreement was reduced to $100 million from $200 million; and

• Acquisitions aggregating in excess of $150 million during the term of the amended credit agreement require the consent of lenders holding greater than 50% of the commitments and loans.

Healthways is a Nashville-based provider of well-being improvement solutions.

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