EnviroStar, Inc., and certain of its subsidiaries entered into a Credit Agreement with Bank of America as Administrative Agent, Swingline Lender and L/C Issuer, Merrill Lynch, Pierce, Fenner & Smith Incorporated and U.S. Bank National Association, as Joint Lead Arrangers, Merrill Lynch, as Sole Bookrunner, and other lender parties thereto, whereby the lenders agreed to make available to the Company a five-year revolving credit facility in the maximum aggregate principal amount of up to $100 million, with an accordion feature to increase the revolving credit facility by up to $40 million for a total of $140 million. A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit up to a sublimit of $10 million.
The Credit Agreement replaces the Company’s existing Credit Agreement, October 7, 2016, by and between the Company and Wells Fargo Bank, National Association, as amended. The Prior Credit Agreement was terminated effective November 2, 2018.
The obligations of the Company under the Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries. The payment and performance of all indebtedness and other obligations of Company to the lenders is guaranteed jointly and severally by certain of the Company’s subsidiaries.
The Credit Agreement is intended to provide funds (i) to finance Permitted Acquisitions (as defined in the Credit Agreement), (ii) for capital expenditures, (iii) to refinance the indebtedness under the Prior Credit Agreement, (iv) to make certain Restricted Payments (as defined in the Credit Agreement), and (v) for working capital and other general corporate purposes.
Borrowings (other than swingline loans) under the Credit Agreement bear interest, at a rate based on (a) LIBOR plus a margin that ranges between 1.25% and 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the one month LIBOR rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. Swingline loans in U.S. dollars bear interest calculated at the Base Rate plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. Loans outstanding under the Credit Agreement may be prepaid at any time in whole or in part without premium or penalty, other than customary LIBOR breakage costs, if any, subject to the terms and conditions contained in the Credit Agreement. The Credit Agreement terminates and any outstanding loans under it mature on November 2, 2023.