Item 1.01. Entry into a Material Definitive Agreement.
Issuance of Senior Notes due 2025
On August 24, 2017 (the Issue Date), West Street Merger Sub, Inc., a Massachusetts corporation (Merger Sub), a
wholly-owned subsidiary of West Street Intermediate Holdings Corp., a Delaware corporation (Parent), the successor entity of West Street Parent, LLC, issued $770.0 million aggregate principal amount of 6.375% Senior Notes due 2025
(the Notes) pursuant to an Indenture, dated as of the Issue Date (the Indenture), by and between Merger Sub and Wilmington Trust, National Association, as trustee (the Trustee).
On the Issue Date, the gross proceeds from the offering of the Notes were deposited into an escrow account. The gross proceeds from the
offering of the Notes were released from escrow on September 29, 2017 (the Escrow Release Date) after certain escrow conditions were satisfied, including the consummation of the Merger (as defined below). The net proceeds from the
offering of the Notes, together with borrowings under our New Term Loan Facility (as defined below) and cash equity contributions by certain investment funds affiliated with Pamplona Capital Management (the Sponsor), were used to
(i) finance the consummation of the Merger and other transactions contemplated by the Merger Agreement (as defined below), including amounts payable thereunder, (ii) repay in full all outstanding indebtedness under the Existing Credit
Facilities (as defined below), (iii) fund the prepayment of all of the Existing Notes (as defined below) and (iv) pay related fees, costs, premiums and expenses in connection with these transactions.
Indenture and Supplemental Indenture
On the Issue Date, Merger Sub and the Trustee entered into the Indenture, providing for the issuance of the Notes. The Notes bear interest at
6.375% per annum and mature on September 1, 2025. Interest on the Notes is payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2018, to holders of record at the close of business on
February 15 or August 15, as the case may be, immediately preceding each such interest payment date.
Prior to September 1,
2020, the Notes may be redeemed at any time and from time to time, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the
redemption date, plus a make-whole premium set forth in the Indenture. In addition, prior to September 1, 2020, up to 40% of the aggregate principal amount of the Notes may be redeemed at a redemption price (expressed as a
percentage of the principal amount of Notes to be redeemed) equal to 106.375% plus accrued and unpaid interest, if any, to, but not including, the redemption date, with the net cash proceeds of an Equity Offering (as defined in the Indenture),
subject to certain conditions.
On or after September 1, 2020, the Notes will be subject to redemption at any time and from time to
time, in whole or in part, at the applicable redemption price (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, thereon, to, but not including, the redemption date, if redeemed during the
twelve-month period beginning on September 1 of the years indicated below:
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Year
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Percentage
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2020
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103.188
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%
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2021
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101.594
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%
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2022 and thereafter
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100.000
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%
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The Indenture contains restrictive covenants that limit, among other things, the ability of PAREXEL
International Corporation (the Company) and the Guarantors (as defined below) to incur or guarantee additional debt or issue disqualified stock or certain preferred stock; pay dividends and make other distributions on or repurchase
capital stock; make certain investments; create or incur certain liens; enter into restrictions affecting the ability of restricted subsidiaries to make distributions, loans or advances or transfer assets to the Company or the Guarantors; enter into
certain transactions with affiliates; merge or consolidate or transfer or sell all or substantially all of the Companys or the Guarantors assets; designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell
certain assets. These covenants are subject to a number
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of important limitations and exceptions. The Indenture also contains customary events of default which would permit the holders of the Notes to declare those Notes to be immediately due and
payable if not cured within applicable grace periods, including the failure to make timely payments on the Notes or other material indebtedness, the failure to satisfy covenants and specified events of bankruptcy and insolvency.
Upon the consummation of the Merger, Merger Sub merged with and into the Company, with the Company surviving the Merger, and the Company and
West Street Holdings III Ltd., the indirect parent of the Company (UK Holdings), and each of UK Holdings wholly-owned U.S. and
non-U.S.
restricted subsidiaries organized in England and Wales
or Germany, other than the Company and its subsidiaries, each of the Companys wholly-owned domestic restricted subsidiaries, in each case that guarantee the Companys obligations under its New Senior Secured Credit Facilities (the
Guarantors) entered into a supplemental indenture to the Indenture, dated as of September 29, 2017 (the Supplemental Indenture) with the Trustee. Pursuant to the Supplemental Indenture, the Company assumed all of
the obligations of Merger Sub under the Notes and the Indenture, and the Notes were guaranteed on a senior unsecured basis by the Guarantors. The guarantees provided by the Guarantors may be released under certain circumstances described in the
Indenture.
New Senior Secured Credit Facilities
On September 29, 2017 the Company entered into a credit agreement (the Credit Agreement) governing its new senior secured
credit facilities (the New Senior Secured Credit Facilities) with Bank of America, N.A. as administrative agent, collateral agent, swing line lender and an L/C issuer.
The New Senior Secured Credit Facilities provide for a senior secured term loan facility in an aggregate principal amount of
$2,065.0 million (the New Term Loan Facility) and a senior secured revolving credit facility in an aggregate principal amount of $300.0 million (the New Revolving Facility).
The New Revolving Facility includes
sub-facilities
for letters of credit and for short-term borrowings
referred to as the swing line borrowings. In addition, the Credit Agreement provides that we will have the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving credit commitments in an
aggregate principal amount of up to (a) the greater of (1) $412.5 million and (2) an amount equal to 100.0% of the Companys trailing twelve-month consolidated EBITDA at the time of determination, plus
(b) an amount equal to all voluntary prepayments, repurchases and redemptions of the term loans under the Credit Agreement and certain other
incremental equivalent debt and permanent revolving credit commitment reductions under the Credit Agreement, in each case on or prior to the date of any such incurrence (to the extent not funded with the proceeds of long-term debt other than
revolving loans), plus (c) an additional unlimited amount so long as we (I) in the case of incremental indebtedness that is secured by the collateral on a
pari passu
basis with the New Senior Secured Credit Facilities, do not exceed
a specified
pro forma
first lien net leverage ratio, (II) in the case of incremental indebtedness that is secured by the collateral on a junior basis with respect to the New Senior Secured Credit Facilities, do not exceed a specified
pro forma
secured net leverage ratio and (III) in the case of unsecured incremental indebtedness, either do not exceed a specified total net leverage ratio or satisfy a specified interest coverage ratio (or, to the extent any of the
foregoing are incurred in connection with an acquisition or similar investment, a leverage ratio not higher than the applicable leverage ratio or interest coverage ratio not lower than the interest coverage ratio, in each case, in effect immediately
prior to such acquisition or similar investment). The lenders under the New Senior Secured Credit Facilities are not under any obligation to provide any such incremental loans or commitments, and any such addition of or increase in loans will be
subject to certain customary conditions precedent and other provisions.
Interest Rate and Fees
Borrowings under the New Senior Secured Credit Facilities will bear interest, at the Companys option, at a rate per annum equal to an
applicable margin over either (a) a base rate determined by reference to the highest of (1) the administrative agents prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the LIBOR rate determined
by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing, in each case, subject to interest rate floors of 0.00%.
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Prepayments
The New Senior Secured Credit Facilities contain customary mandatory prepayments, including with respect to excess cash flow, asset sale
proceeds and proceeds from certain incurrences of indebtedness. The Company may voluntarily repay outstanding loans under the New Senior Secured Credit Facilities at any time without premium or penalty, other than customary breakage costs with
respect to LIBOR loans; provided, however, that any voluntary prepayment, refinancing or repricing of the term loans under the New Term Loan Facility in connection with certain repricing transactions that occur prior to the
six-month
anniversary of the closing of the New Senior Secured Credit Facilities are subject to a prepayment premium of 1.00% of the principal amount of the term loans so prepaid, refinanced or repriced.
Amortization and Maturity
The term loans under the New Term Loan Facility amortize in equal quarterly installments in an aggregate annual amount equal to 1.00% of the
original principal amount of such term loans, with the balance being payable on the date that is seven years after the closing of the New Senior Secured Credit Facilities. The New Revolving Facility will mature five years after the closing of the
New Senior Secured Credit Facilities.
Guarantee and Security
All of the Companys obligations under the New Senior Secured Credit Facilities and certain hedge agreements and cash management
arrangements provided by any lender party to the New Senior Secured Credit Facilities or any of its affiliates and certain other persons will be unconditionally guaranteed by UK Holdings, the Company (with respect to hedge agreements and cash
management arrangements not entered into by the Company) and certain of UK Holdings existing and subsequently acquired or organized direct or indirect material wholly-owned U.S., U.K. and other
non-U.S.
restricted subsidiaries, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in material adverse tax consequences.
All obligations under our New Senior Secured Credit Facilities and certain hedge agreements and cash management arrangements provided by any
lender party to the New Senior Secured Credit Facilities or any of its affiliates and certain other persons, and the guarantees of such obligations, will be secured, subject to permitted liens and other exceptions, by: (i) a perfected
first-priority pledge of all the equity interests of the Company and each wholly-owned material restricted subsidiary of UK Holdings directly held by UK Holdings or a subsidiary guarantor (limited to 65% of voting stock in the case of first-tier
non-U.S.
subsidiaries of the Company) and (ii) perfected first-priority (a) security interests in substantially all tangible and intangible personal property of UK Holdings and its subsidiary guarantors
and (b) mortgages on material
fee-owned
real property of the Company and its subsidiary guarantors located in the U.S. and in excess of a specified value (subject to certain other exclusions).
Certain Covenants and Events of Default
The New Senior Secured Credit Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, the
ability of the Company and the ability of the restricted subsidiaries of UK Holdings to:
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incur additional indebtedness and guarantee indebtedness;
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engage in mergers or consolidations;
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sell, transfer or otherwise dispose of assets;
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pay dividends and distributions or repurchase capital stock;
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prepay, redeem or repurchase certain indebtedness;
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make investments, loans and advances;
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enter into certain transactions with affiliates;
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enter into agreements which limit our ability and the ability of our restricted subsidiaries to incur restrictions on their ability to make distributions; and
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enter into amendments to certain subordinated indebtedness in a manner materially adverse to the lenders.
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The New Senior Secured Credit Facilities contain a springing financial covenant requiring compliance with a maximum ratio of first lien net
indebtedness to consolidated EBITDA of 7.75:1.00, applicable solely to the New Revolving Facility. The financial covenant will be tested on the last day of any fiscal quarter (commencing with the first full fiscal quarter after the closing date of
the Merger) only if the aggregate principal amount of borrowings under the New Revolving Facility (including swingline loans) and certain outstanding letters of credit (except to the extent such letters of credit have been cash collateralized or
satisfactorily backstopped and excluding any
non-cash
collateralized or backstopped letters of credit up to $35.0 million in the aggregate), exceeds 35% of the total amount of commitments under the New
Revolving Facility on such day.
The New Senior Secured Credit Facilities will also contain certain customary affirmative covenants and
events of default for facilities of this type, including relating to a change of control. If an event of default occurs, the lenders under the New Senior Secured Credit Facilities will be entitled to take various actions, including the acceleration
of amounts due under the New Senior Secured Credit Facilities and all actions permitted to be taken by secured creditors.