NeoPhotonics Corporation entered into a Credit Agreement with Wells Fargo Bank as administrative agent and the lenders party thereto.
The Credit Agreement provides for a $50 million revolving credit facility, $30 million of which was drawn at closing. The Credit Facility includes a $5 million letter of credit subfacility. The Credit Facility matures on June 30, 2022. The Company will use the proceeds of the Credit Facility to pay off its existing facility with Comerica Bank and for working capital needs and general corporate purposes.
Loans under the Credit Facility bear interest, at the Company’s option, at a rate equal to either (a) the LIBOR rate, plus an applicable margin ranging from 1.50% to 1.75% per annum, based upon the average excess availability (as defined in the Credit Agreement), or (b) the prime lending rate, plus an applicable margin ranging from 0.50% to 0.75% per annum, based upon the average excess availability. The Company is required to pay a commitment fee equal to 0.25% of the unused portion of the Credit Facility, monthly in arrears.
The obligations of the Company under the Credit Facility are not currently guaranteed by any of the Company’s wholly-owned subsidiaries, but may in the future be guaranteed by certain material domestic subsidiaries of the Company (collectively, the “Loan Parties”). The obligations of the Loan Parties under the Credit Agreement and other loan documents are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (a) all tangible and intangible assets of the Loan Parties, except for intellectual property and other certain excluded assets, and (b) all of the equity interests of the subsidiaries of the Loan Parties held by the Loan Parties (limited, in the case of the voting equity interests of certain material foreign subsidiaries and certain domestic subsidiaries that hold no assets other than equity interests of foreign subsidiaries, to 65% of the voting equity interests of such subsidiaries).
The Company is permitted to terminate or reduce the revolving commitments of the lenders and to make voluntary prepayments at any time, without premium or prepayments. The Company is not required to make mandatory prepayments of outstanding indebtedness under the Credit Agreement other than in the case that the aggregate amount of all outstanding loans and letters of credit issued under the Credit Facility exceed the aggregate commitment of all lenders under the Credit Facility.
The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Loan Parties and its consolidated subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. Under the terms of the Credit Agreement, the Company is required to comply with a liquidity covenant.