Item 1.01 Entry into a Material Definitive Agreement
On March 17, 2017, FactSet Research Systems Inc. (“FactSet” or the “Company”), entered into a Credit Agreement (the “Credit Agreement”) between FactSet, as the borrower, and PNC Bank, National Association., as the administrative agent and lender (the “Lender”). The description of the Credit Agreement is qualified in its entirety by reference to the full text of the Credit Agreement attached hereto as Exhibit 10.1.
Available Credit Facility
The Credit Agreement provides for a $575,000,000 revolving credit facility (the “Revolving Credit Facility”). FactSet may request borrowings under the Revolving Credit Facility until its maturity date of March 17, 2020. The Credit Agreement also allows FactSet, subject to certain requirements, to arrange for additional borrowings with the Lender for an aggregate amount of up to $225,000,000, provided that any such request for additional borrowings must be in a minimum amount of $25,000,000. At FactSet’s option, a borrowing may be in the form of a base rate loan or a LIBOR rate loan.
Borrowing
On March 17, 2017, FactSet borrowed $575,000,000 in the form of a LIBOR rate loan (the “Loan”) under the Revolving Credit Facility. The proceeds of the Loan made under the Credit Agreement may be used for permitted acquisitions and general corporate purposes. The Loan matures on March 17, 2020. There are no prepayment penalties in the event that the Company elects to prepay the Loan prior to its scheduled maturity date. The principal balance is payable in full on the maturity date.
Interest and Fees
Borrowings under the Loan bear interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus 1.00%. Interest on the Loan is payable quarterly in arrears and on the maturity date.
FactSet is required to pay to the Lender a commitment fee based on the daily amount by which the unused Revolving Credit Facility exceeds the borrowed amount. No commitment fee was owed by FactSet since it borrowed the full amount of the Revolving Credit Facility on March 17, 2017.
Debt issuance costs incurred by FactSet, such as legal costs to review the Credit Agreement, administrative agent fees and upfront Lender fees, were approximately $0.4 million. FactSet capitalized these debt issuance costs as an asset and will subsequently amortize the deferred debt issuance costs ratably over the term of the Credit Arrangement.
Loan Covenants
The Credit Agreement contains covenants restricting certain FactSet activities, which are usual and customary for this type of loan. These covenants restrict FactSet’s ability to:
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create, incur, assume, or suffer to exist any lien upon any property, assets or revenues, whether now owned or subsequently acquired, other than permitted liens;
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make non-short-term investments;
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create, incur, assume or allow to exist any indebtedness, other than permitted indebtedness;
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make fundamental changes to the assets of the business;
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make any disposition or enter into any agreement to make any disposition of assets, other than in the ordinary course of business and permitted dispositions;
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declare or make, directly or indirectly, any restricted payment, except as permitted under the Credit Agreement;
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change the nature of its business;
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enter into any transaction of any kind with any affiliate other than on an arm’s length basis; and
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use loan proceeds to purchase or carry margin stock.
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In addition, the Credit Agreement requires that FactSet must maintain a consolidated leverage ratio, as measured by total funded debt/EBITDA, below a specified level as of the end of each fiscal quarter.
Events of Default
Events of default under the Credit Agreement include non-payment, breach of covenants, material misrepresentations, cross-default events, insolvency, inability to pay debts, judgments in excess of the threshold amount, an ERISA event, invalidity of loan documents, and change of control.
Retirement of Debt
In conjunction with FactSet’s entrance into the Credit Agreement on March 17, 2017, FactSet retired its outstanding debt under an amended credit agreement between FactSet, as the borrower, and Bank of America, N.A., as the lender. The total principal amount of the loan outstanding at the time of retirement was $365.0 million. The maturity date on the outstanding loan was September 21, 2018 and there were no prepayment penalties.