Cerence details new $125 million term loan, $50 million revolver

By Sarah Lizee

Olympia, Wash., June 17 – Cerence Inc. detailed the $175 million of senior secured financing that closed on Friday, which consists of a new $125 million senior secured term loan and a $50 million senior secured first-lien revolver, in an 8-K filing with the Securities and Exchange Commission.

Wells Fargo Securities, LLC and SunTrust Robinson Humphrey, Inc. are the joint lead arrangers and joint bookrunners. Wells Fargo Bank, NA is the administrative agent.

Up to $15 million may be used under the revolver for the issuance of letters of credit.

Cerence borrowed a total of $125 million under the term loan facility on the financing closing date.

The letters of credit and revolving facility are available for working capital and other general corporate purposes.

On the financing closing date, the borrower used a portion of the proceeds of the term loan facility to pay in full all debt under its credit agreement dated Oct. 1, 2019 with Barclays Bank plc as administrative agent.

The facilities mature four years after the financing closing date, with some extension rights in the discretion of each lender.

Initially, interest is Libor plus 300 basis points. The margin can range from 230 bps to 350 bps, based on the net total leverage ratio.

There is a commitment fee on the revolver of 37.5 bps to 50 bps, also based on the net total leverage ratio.

The company must make quarterly principal payments in an aggregate annual amount equal to 5% of the original principal amount of the term loan facility during the first two years and 10% of the original principal amount of the term loan facility thereafter, with the balance payable at the maturity date. The amortization payments may be reduced as a result of the application of loan prepayments made by the company, if any, prior to the scheduled date of payment.

The borrower may voluntarily prepay borrowings under the credit agreement without premium or penalty, subject to customary breakage costs. The borrower may also reduce the commitments under the revolver, in whole or in part, in each case subject to minimum amounts and increments.

The credit agreement also contains mandatory prepayment provisions in the event that the company incurs certain types of debt or receives net cash proceeds from non-ordinary course asset sales or other dispositions of property.

In addition, the credit agreement contains financial covenants, each tested quarterly commencing with the quarter ended Sept. 30, including a net secured leverage ratio of not greater than 3.25 to 1.00; a net total leverage ratio of not greater than 4.25 to 1.00; and minimum liquidity of at least $75 million.

Cerence is a Burlington, Mass.-based voice recognition technology company serving the automotive industry.

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