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Item 1.01.
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Entry into a Material Definitive Agreement.
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On June 30, 2017, AAC Holdings, Inc.
(the “Company”) entered into that certain Credit Agreement (the “2017 Credit Facility”) with Credit Suisse AG, as administrative agent and collateral agent and the Lenders party thereto. The 2017 Credit Facility makes
available to the Company a $40.0 million revolving line of credit (the “Revolving Loans”) and a term loan in an aggregate principal amount of $210.0 million (“Term Loan” and, together with the Revolving Loans, the
“Loans”). The 2017 Credit Facility also provides for standby letters of credit in an aggregate undrawn amount not to exceed $7.0 million.
The Term Loan will mature on June 30, 2023 and will require scheduled quarterly principal repayments in an amount equal to 2.5% in the
first and second years of the term and 5.0% thereafter. The Term Loan was fully drawn on June 30, 2017. The Revolving Loans will mature on June 30, 2022. $14.5 million of the Revolving Loans were funded on June 30, 2017. No
amortization will be required with respect to the Revolving Loans.
The 2017 Credit Facility also includes an incremental facility
providing for the Company to incur Additional Term Loans in an aggregate principal amount of up to $25.0 million (plus such additional amounts, so long as, after giving pro forma effect to the incurrence of such additional borrowings, the
Company’s Senior Secured Leverage Ratio (as defined in the 2017 Credit Facility) would be less than 3.90:1.00) and/or Additional Revolving Commitments in an aggregate principal amount of up to $15.0 million, each subject to the satisfaction of
certain conditions contained in the 2017 Credit Facility, including obtaining additional commitments from existing or additional lenders. The Lenders under the 2017 Credit Facility are not under any obligation to provide any such additional term
loan facilities or revolving credit commitments.
Borrowings under the 2017 Credit Facility are guaranteed by the Company’s wholly
owned subsidiary, American Addiction Centers, Inc., and certain of its other subsidiaries pursuant to that certain Guarantee and Collateral Agreement, dated as of June 30, 2017, by and among the Company, each of the subsidiary guarantors party
thereto and Credit Suisse AG, as collateral agent (the “Guarantee and Collateral Agreement”). The obligations are secured by a lien on substantially all of the Company’s and each subsidiary guarantor’s assets.
Borrowings under the 2017 Credit Facility bear interest at a rate tied to the Alternative Base Rate or the Adjusted LIBO Rate (at the
Company’s option, and both as defined in the 2017 Credit Facility). ABR Loans (as defined in the 2017 Credit Facility) made as Revolving Loans bear interest at a rate per annum equal to the Alternative Base Rate plus 5.0% per annum.
ABR Loans made as Term Loans bear at the Alternate Base Rate plus interest plus 5.75% per annum. Eurodollar Loans (as defined in the 2017 Credit Facility) made as Revolving Loans bear interest at the applicable Adjusted LIBO Rate plus 6.0%.
Eurodollar Loans made as Term Loans bear interest at the applicable Adjusted LIBO Rate plus 6.75% (with a 1.0% floor). In addition, under the 2017 Credit Facility, the Company will pay a commitment fee for the undrawn portion of the revolving credit
facility of 0.5% per annum, payable on a quarterly basis. The proceeds of the Term Loan were or will be used by the Company to (i) prepay all existing indebtedness outstanding under the Bank of America Credit Agreement (as defined below),
and the Deerfield Facility (as defined below), (ii) to pay transaction costs associated with the foregoing and (iii) for general corporate purposes. The proceeds of the Revolving Loans made at closing will be used (x) to pay the
Deerfield Consent Fee (as defined below) in full, (y) to pay transaction costs associated with the foregoing and (z) for general corporate purposes of the Company and its subsidiaries. After the closing, proceeds of the Revolving Loans
will be used solely for general corporate purposes.
The Company will be permitted to voluntarily reduce the unutilized portion of the
commitment amount and repay outstanding loans under the 2017 Credit Facility at any time without premium or
penalty, other than customary “breakage” costs with respect to Eurodollar Loans and if certain repricing transactions are consummated, (i) a yield maintenance premium within one
year after the closing as set forth in the 2017 Credit Facility, (ii) a 2.0% premium if paid after the first anniversary of the closing but before the second anniversary of the closing and (iii) a 1.0% premium if paid after the second
anniversary of the closing but before the third anniversary of the closing.
In addition, the 2017 Credit Facility will require the
Company to prepay outstanding Term Loans, subject to certain exceptions, with:
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75.0% (which percentage will be reduced to 50.0% if the Company’s Senior Secured Leverage Ratio is not greater than 3.25:1.00 and to 25.0% if the Company’s Senior Secured Leverage Ratio is not greater than
2.75:1.00) of the Company’s annual excess cash flow (as defined by the 2017 Credit Facility);
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100.0% of the net cash proceeds of certain asset sales or other dispositions of property or certain casualty events, in each case subject to certain exceptions and provided that the Company may reinvest within 365 days
in assets to be used in its business or certain other permitted investments;
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100.0% of the net cash proceeds of the incurrence of debt and issuance of Disqualified Stock (as defined by the 2017 Credit Facility) other than proceeds from debt permitted under the 2017 Credit Facility; and
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100.0% of the net cash proceeds of equity issuances in the event the Senior Secured Leverage Ratio is greater than 3.00:1.00, calculated on a pro forma basis, at the time of such issuances (or such lesser percentage
required for the Senior Secured Leverage Ratio to be equal to or less than 3.00:1.00).
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The 2017 Credit Facility requires
the Company to not permit its Senior Secured Leverage Ratio to exceed 5.25:1.00, with incremental step downs to 4.75:1.00 on or after March 31, 2019 and 4.25:1.00 on or after March 31, 2020, and places certain restrictions on the ability of the
Company and its subsidiaries to, among other things, incur debt and liens; merge, consolidate or liquidate; dispose of assets; enter into hedging arrangements; pay dividends and make other restricted payments; undertake transactions with affiliates;
enter into restrictive agreements on dividends and other distributions; make negative pledges; enter into certain sale-leaseback transactions; make certain investments; prepay or modify the terms of certain indebtedness; and modify the terms of
certain organizational agreements.
The 2017 Credit Facility contains customary events of default, including payment defaults, breaches of
representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, invalidity of loan documents and certain changes in control.
The foregoing description of the 2017 Credit Facility does not purport to be a complete description of the parties’ rights and
obligations under the 2017 Credit Facility. The above description is qualified in its entirety by reference to the complete 2017 Credit Facility, a copy of which is filed herewith as Exhibit 10.1 and to the complete Guarantee and Collateral
Agreement, a copy of which is filed herewith as
Exhibit 10.2
, both of which are incorporated by reference herein.
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Item 1.02.
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Termination of a Material Definitive Agreement.
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In connection with the effectiveness of
the 2017 Credit Facility, effective June 30, 2017, the Company terminated (i) that certain Credit Agreement, dated March 9, 2015, by and among the
Company, certain of the Company’s subsidiaries, Bank of America, N.A. as administrative agent, swingline lender, and L/C issuer, and Suntrust Bank, as syndication agent, Raymond James Bank,
N.A. and BMO Harris Bank N.A., as co-documentation agents and other lender parties therein, as amended from time to time (the “Bank of America Credit Agreement”) and (ii) that certain Facility Agreement, dated October 2, 2015
(the “Deerfield Facility”), by and among the Company, Deerfield Private Design Fund III, L.P., Deerfield Partners, L.P. and Deerfield International Master Fund, L.P. (collectively, “Deerfield”).
In connection with the termination of the Deerfield Facility, the Company paid a consent fee in the amount of $3.0 million (the
“Deerfield Consent Fee”).