HealthEquity closes $1.6 billion five-year term loan A, revolver

By Marisa Wong

Los Angeles, Aug. 30 – HealthEquity, Inc. entered into a credit agreement on Friday with Wells Fargo Bank, NA as administrative agent for a $1.25 billion five-year senior secured term loan A and a $350 million five-year senior secured revolver, according to an 8-K filing with the Securities and Exchange Commission.

Wells Fargo Securities, LLC, Goldman Sachs Bank USA, JPMorgan Chase Bank, NA, Citibank, NA, RBC Capital Markets and SunTrust Robinson Humphrey, Inc. are joint lead arrangers and joint bookrunners. Goldman Sachs, JPMorgan, Citibank, RBC and SunTrust are also syndication agents.

The revolver includes a $25 million sublimit for the issuance of letters of credit.

HealthEquity may incur additional loans or commitments under the credit agreement in an aggregate principal amount of up to $300 million, plus an additional amount as long as its pro forma secured net leverage ratio would not exceed 3.85 to 1.00.

Borrowings will bear interest at Libor plus a margin ranging from 125 basis points to 225 bps, with the applicable margin based on leverage. The applicable margin is initially 200 bps.

The commitment fee on the average unused amount of the revolver ranges from 20 bps to 40 bps, also based on leverage, and is initially 35 bps.

Term loans will amortize in equal quarterly installments of 2.5% for the first year after the closing of the merger, stepping up to 5% for each of the second and third years, 7.5% for the fourth year and 10% for the fifth year.

In addition, the term loan is to be prepaid with 100% of the cash proceeds of all asset sales and insurance and condemnation recoveries.

The credit agreement contains financial performance covenants that require HealthEquity to maintain (i) a maximum total net leverage ratio of no greater than 5.25 to 1.00, stepping down to 5.00 to 1.00 beginning with the fiscal quarter ending July 31, 2020 and to 4.50 to 1.00 beginning with the fiscal quarter ending July 31, 2021 and (ii) a minimum interest coverage ratio of no less than 3.00 to 1.00.

HealthEquity is a Draper, Utah-based health savings account non-bank custodian.

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