8x8, Inc., a leading integrated cloud communications platform provider, announced a new $250 million senior secured term loan facility in a transaction led by Francisco Partners. Under the credit agreement, the Company intends to use the facility to fund the cash portion of an exchange of approximately $404 million principal amount of the Company’s 0.50% convertible notes due 2024 and the concurrent repurchase of approximately $60 million of the Company’s common stock.
“We are excited to partner with 8x8 by providing a customized capital solution,” said Scott Eisenberg, Head of Credit and Structured Solutions at Francisco Partners. “8x8 is a leader in the large and growing cloud communications market and we look forward to supporting management by helping advance their vision for the business and drive value for all stakeholders.”
“Francisco Partners’ commitment of capital to 8x8 recognizes the opportunity and importance of our XCaaS vision to deliver a single-vendor cloud communications and contact center solution that empowers workers in today’s hybrid workplaces,” said Samuel Wilson, 8x8 Chief Financial Officer. “By simultaneously executing a term loan, convertible debt exchange, and share repurchase, we extend the maturity of more than 80 percent of our 2024 convertible debt while limiting the potential dilutive impact to existing shareholders. Our continued focus on operational efficiency was a key factor in negotiating favorable terms for these transactions. Consistent with the increased emphasis on profitability and cash flow generation we communicated with our fiscal first quarter earnings release, we reiterate our recently communicated goals of remaining operating cash flow positive and generating an operating profit on a non-GAAP basis.”
Term Loan Facility Details
The term loan facility will mature in July 2027. Advances under the term loan facility will bear interest at an annual rate equal to the Term Secured Overnight Financing Rate (SOFR), plus a margin of 6.50%, subject to a floor of 1.00% and a credit spread adjustment of 0.10%. Wilmington Savings Fund Society, FSB will serve as administrative agent, with certain affiliates of Francisco Partners as lenders (the “Credit Agreement”).
In conjunction with the term loan facility, the Company also issued detachable warrants exercisable for an aggregate of 3.1 million shares of the Company’s common stock to Francisco Partners and its affiliates. The warrants carry a five-year term and an exercise price equal to $7.15, representing a 27.5% premium over the closing price of the Company’s common stock on August 3, 2022, the pricing date.
Loans under the Credit Agreement contain customary financial covenants as well as affirmative and negative covenants customary for transactions of this type, including minimum liquidity and limitations with respect to indebtedness, liens, investments, dividends, disposition of assets, change in business and transactions with affiliates.
The Credit Agreement will be guaranteed by certain of the Company’s wholly-owned subsidiaries, other than immaterial subsidiaries and other customary exceptions, and secured by a perfected security interest in substantially all of the Company’s tangible and intangible assets, as well as substantially all of the tangible and intangible assets of the guarantors.
The initial funding of loans under the Credit Agreement is expected to occur on August 10, 2022, subject to customary closing conditions.
J. Wood Capital Advisors LLC acted as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor to the Company on the transaction.