| Item 1.01 | Entry into a Material Definitive Agreement. |
Senior Credit Facilities
Today, LPL Financial Holdings Inc. announced the closing of a leverage neutral transaction to refinance its existing Term Loan B facility with a new Term Loan A facility. The refinancing is expected to result in annual cash interest expense savings of approximately $4 million.
On December 5, 2024, LPL Holdings, Inc. (the “Borrower”) entered into the ninth amendment (the “Amendment”) to its amended and restated credit agreement, dated as of March 10, 2017, among the Borrower, LPL Financial Holdings Inc., JPMorgan Chase Bank, N.A., as administrative agent, swing-line lender and letter of credit issuer, and the lenders and the other parties party thereto from time to time (as amended, supplemented or otherwise modified from time to time prior to the Amendment, the “Credit Agreement”).
Pursuant to the Amendment, the Credit Agreement was amended to, among other changes, (i) refinance the amount outstanding under the Borrower’s existing $1,019,175,000 term loan B facility (the “Term Loan B”) with a new $1,020,000,000 term loan A facility (the “Term Loan A”), (ii) release the guarantees of the obligations of the Borrower under the Credit Agreement provided by each person that was a subsidiary guarantor (the “Subsidiary Guarantors”), (iii) release all of the security interests and liens granted to the collateral agent by the Borrower, LPL Financial Holdings Inc. and the Subsidiary Guarantors to secure the obligations of the Borrower under the Credit Agreement and (iv) suspend certain restrictive covenants.
The Term Loan A will mature on December 5, 2026 and will bear interest at a floating rate equal to either (i) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus an applicable margin or (ii) the alternate base rate plus an applicable margin, in each case, with such applicable margin determined based on the Borrower’s senior unsecured debt rating issued by Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services. As of December 5, 2024, Term SOFR Rate Loans (as defined in the Credit Agreement) will bear interest at the Adjusted Term SOFR Rate (which includes a 10 basis points per annum credit spread adjustment) plus 137.5 basis points per annum, compared to the Adjusted Term SOFR Rate plus 175 basis points per annum under the Term Loan B. The Adjusted Term SOFR Rate is subject to an interest rate floor of 0.0%, and the alternative base rate is subject to an interest rate floor of 1.0%.
The Term Loan A is not subject to any required amortization payments, mandatory prepayments (other than in connection with a debt incurrence prepayment event) or prepayment premiums.
The Borrower and its restricted subsidiaries are required to comply with a maximum Consolidated Total Debt to Consolidated EBITDA Ratio (as defined in the Credit Agreement) and a minimum Consolidated EBITDA to Consolidated Interest Expense Ratio (as defined in the Credit Agreement), tested as of the last day of each fiscal quarter, which are the same financial performance covenants applicable to the existing revolving facility. The breach of these covenants is subject to certain equity cure rights.
The foregoing description of the Amendment is qualified in its entirety by reference to the copy thereof filed as Exhibit 10.1 to this Current Report on Form 8-K.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth above under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
