Item 1.01. Entry into a Material Definitive Agreement.
Quad/Graphics, Inc. (the “Company”) completed the fifth amendment (the “Amendment”) to the Company’s April 28, 2014 Senior Secured Credit Facility on November 2, 2021. The Senior Secured Credit Facility was amended to (a) reduce the aggregate amount of the existing revolving credit facility from $500 million to $432.5 million, and extend the maturity of a portion of the revolving credit facility such that $90 million under the revolving credit facility will be due on the existing maturity date of January 31, 2024 (the “Existing Maturity Date”) and $342.5 million under the revolving credit facility will be due on November 2, 2026 (the “Extended Maturity Date”); (b) extend the maturity of a portion of the existing term loan facility such that $91.5 million of such term loan facility will be due on the Existing Maturity Date and $483.9 million will be due on the Extended Maturity Date; (c) make certain adjustments to pricing, including an increase of 0.50% to the interest rate margin applicable to the loans maturing on the Extended Maturity Date; (d) modify certain financial and operational covenants; and (e) modify the interest rate provisions relating to the phase-out of LIBOR as a reference rate.
The following amendments were made to the quarterly financial covenants to which the Company is subject (all financial terms, numbers and ratios are as defined in the Senior Secured Credit Facility, as amended by the fifth amendment):
•On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated total indebtedness to consolidated EBITDA, shall not exceed 3.75 to 1.00 for the quarter ending December 31, 2021 and each quarter thereafter.
•Liquidity, defined as unrestricted cash and permitted investments of the Company and its subsidiaries (subject to certain conditions) plus the aggregate amount of the unused revolving credit facility commitments, shall not be less than $181.6 million at any time during the period commencing December 15, 2023 and ending when all obligations owed under the Senior Secured Credit Facility to lenders that are not extending lenders are paid in full.
•On a rolling four-quarter basis, the Senior Secured Leverage Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31, 2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than, in the case of this clause (b), any fiscal quarter ending on September 30 of any year, each of which shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00).
In addition to the above listed covenants, the following amendment was made to certain limitations on acquisition, indebtedness, liens, dividends and repurchases of capital stock set forth in the Senior Secured Credit Facility:
•If the Company’s Total Net Leverage Ratio, which, on a rolling twelve-month basis, is defined as consolidated net indebtedness to consolidated EBITDA, is equal to or greater than 2.75 to 1.00, the Company is prohibited from making greater than $60 million of dividend payments, capital stock repurchases and certain other payments, over the course of the agreement. If the Company’s Total Net Leverage Ratio is above 2.50 to 1.00 but below 2.75 to 1.00, the Company is prohibited from making greater than $100 million of dividend payments, capital stock repurchases and certain other payments, over the course of the agreement. If the Total Net Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions.
The Senior Secured Credit Facility remains secured by substantially all of the unencumbered assets of the Company. The Senior Secured Credit Facility also requires the Company to provide additional collateral to the lenders in certain limited circumstances.
The foregoing description of the fifth amendment to the Company’s Senior Secured Credit Facility does not purport to be complete and is qualified in its entirety by reference to the full text of the fifth amendment to the Company’s Senior Secured Credit Facility, which is attached as Exhibit 4 to this Current Report on Form 8-K and is incorporated herein.
A copy of the press release announcing the closing of the fifth amendment to the Company’s Senior Secured Credit Facility is attached as Exhibit 99 to this Current Report on Form 8-K and is incorporated herein.