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ITT EDUCATIONAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
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Delaware
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1-13144
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36-2061311
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(State or other
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(Commission
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(IRS Employer
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jurisdiction of
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File Number)
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Identification No.)
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incorporation)
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13000 North Meridian Street
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Carmel, Indiana 46032-1404
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (317) 706-9200
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01
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Entry into a Material Definitive Agreement.
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Not later than September 28, 2014, or such later date as is agreed to by the administrative agent, the obligations of the Company under the Credit Agreement and for certain related bank products must be secured by mortgages on all of the real property owned by the Company as of the date of the Fourth Amendment, which consists of 30 separate parcels of land with improvements and fixtures thereon (along with real property described in the next paragraph, the “Mortgaged Property”).
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In the event that, after the date of the Fourth Amendment, the Company or a Subsidiary Guarantor acquires a fee ownership interest in any real property that has a fair market value in excess of $1.0 million, the Company or subsidiary, as applicable, must provide a mortgage on that property to secure the obligations of the Company under the Credit Agreement.
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Section 6.03(b)(iii) of the Credit Agreement is amended such that the exception to the limitation on asset dispositions not otherwise permitted by that section is reduced from $75.0 million in the aggregate during the term of the Credit Agreement to $5.0 million in the aggregate during the period from July 30, 2014 through the remaining term of the Credit Agreement and such asset dispositions must be for fair market value and adequate cash purchase consideration as reasonably determined by the administrative agent; provided, that such limitations do not apply to an asset disposition of Mortgaged Property to the extent such asset disposition generates net cash proceeds of at least 75% of the appraised value of such Mortgaged Property.
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In addition to the existing limitation on Sale and Leaseback Transactions that net cash proceeds received in respect of which may not exceed $125.0 million in the aggregate during the term of the Credit Agreement, Section 6.11 is amended such that any Sale and Leaseback Transaction be for fair market value and adequate cash purchase consideration as reasonably determined by the Administrative Agent, provided that any Sale and Leaseback Transaction of Mortgaged Property shall be deemed to be for fair market value and adequate cash purchase consideration if it generates net cash proceeds of at least 75% of the appraised value of such Mortgaged Property.
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Section 6.01(m) of the Credit Agreement is amended such that the permitted Indebtedness consisting of secured Indebtedness at any time outstanding (and not otherwise permitted by that section) is reduced from $25.0 million to $5.0 million in aggregate principal amount.
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Section 6.02(l) of the Credit Agreement is amended such that permitted Liens to secure Indebtedness, obligations or liabilities at any one time outstanding (which Liens are not otherwise permitted by that section) may not secure debt in excess of $5.0 million in aggregate principal amount, rather than the original $25.0 million.
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In the event that any net cash proceeds are received by the Company or a Material Subsidiary in connection with any sale, transfer, lease or other disposition of Mortgaged Property, including in connection with any Sale and Leaseback Transaction, or any mortgage financing or similar transaction with respect to Mortgaged Property, such net cash proceeds shall (a) first, be delivered to cash collateralize all then outstanding letters of credit under the Credit Agreement until such time as the administrative agent holds cash collateral equaling 103% of the face amount of such letters of credit; and (b) second, be used to repay outstanding borrowings under the Credit Agreement, which repayments shall be accompanied by a corresponding pro rata reduction of the commitment of each lender under the Credit Agreement.
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If any collateral is sold in a transaction permitted under the Credit Agreement or is financed by Indebtedness permitted under the Credit Agreement, the administrative agent will release the mortgage or other security interest in such collateral.
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The definition of “Significant Regulatory Event” in the Credit Agreement is amended to include a delay of more than five days in receipt of funding under Title IV of the Higher Education Act of 1965, as amended, following notice to the Company from the U.S. Department of Education (“DOE”) that the DOE intends to implement funding delays.
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The portion of the commitments of the lenders available for letters of credit is increased from $80.0 million to $98.0 million. The aggregate commitment of the lenders remains at $135.0 million, unless the Company has not caused the issuance of a letter of credit to the DOE (a “DOE Letter of Credit”) by October 31, 2014, in which case the aggregate commitments of the lenders will be reduced to $100.0 million, and the availability for letters of credit will revert to $25.0 million. Certain letters of credit in an aggregate amount of approximately $2.3 million previously issued by JPMorgan Chase Bank, N.A. are deemed to be letters of credit issued pursuant to the Credit Agreement.
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Up to $98.0 million in cash posted as cash collateral for a DOE Letter of Credit will be treated as cash for purposes of determining the Company’s compliance with the minimum Liquidity covenant of the Credit Agreement.
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The Company is required to deliver projected cash flow budgets to the administrative agent on a monthly basis.
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The audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Company, and the certificate of a financial officer of the Company as described in Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal year ending December 31, 2013, required to be furnished by the Company, are required to be furnished by September 15, 2014, instead of July 31, 2014 (the date established by the Third Amendment to Credit Agreement).
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The internally prepared consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Company, and the certificate of a financial officer of the Company as described in Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal quarter ending March 31, 2014, required to be furnished by the Company, are required to be furnished by September 15, 2014, instead of July 31, 2014 (the date established by the Third Amendment to Credit Agreement).
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The internally prepared consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Company, and the certificate of a financial officer of the Company as described in Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal quarter ending June 30, 2014, required to be furnished by the Company, are required to be furnished by September 30, 2014, instead of August 14, 2014 (the original date required pursuant to the Credit Agreement).
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(i)
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any violation of the covenants in Section 5.01(b), Section 5.06, and Section 5.07 of the Credit Agreement, and any Event of Default under Article VII (c) and (e) of the Credit Agreement, solely to the extent that such violations or Events of Default relate to or arise from inaccuracies in, or adjustments to, the financial statements for the fiscal quarters ending March 31, 2013, June 30, 2013, and September 30, 2013 delivered pursuant to Section 5.01(b) of the Credit Agreement;
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(ii)
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any violation of the covenants in Section 5.03 and Section 5.07 of the Credit Agreement, and any Event of Default under Article VII (c) and (e) of the Credit Agreement with respect thereto, solely to the extent that such violations or Events of Default relate to or arise from the Company’s failure to file audited financial statements for the fiscal year ending December 31, 2013 and compliance audits of its institutions’ administration of federal student financial aid programs with the DOE on or before June 30, 2014;
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(iii)
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any violation of the covenant in Section 5.01(c) of the Credit Agreement and any Event of Default under Article VII(c) and (d) of the Credit Agreement with respect thereto, solely to the extent it results from or is related to the matters described in clauses (i) or (ii) above; and
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(iv)
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any violation of Section 5.02(b) of the Credit Agreement and any Event of Default under Article VII(c) and (d) of the Credit Agreement with respect thereto, solely to the extent it results from or is related to the matters described in clauses (i) through (iii) above.
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(d)
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Exhibits:
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10.1
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Fourth Amendment to Credit Agreement, Consent and Waiver, dated as of July 30, 2014, by and among ITT Educational Services, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent
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10.1
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Fourth Amendment to Credit Agreement, Consent and Waiver, dated as of July 30, 2014, by and among ITT Educational Services, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent
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