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| VG > SEC Filings for VG > Form 8-K on 20-Oct-2008 | All Recent SEC Filings |
20-Oct-2008
Entry into a Material Definitive Agreement, Creation of a Direct Financial O
On October 19, 2008, Vonage Holdings Corp. (the "Company") entered into definitive agreements (collectively, the "Credit Documentation") for a financing consisting of (i) a $130.3 million senior secured first lien credit facility (the "First Lien Senior Facility"), (ii) a $72.0 million senior secured second lien credit facility (the "Second Lien Senior Facility") and (iii) the sale of $18.0 million of the Company's 20% senior secured third lien notes due 2015 (the "Convertible Notes" and, together with the First Lien Senior Facility and the Second Lien Senior Facility, the "Financing"). Funding of the Financing is subject to the fulfillment of the conditions precedent specified below, and is currently scheduled for November.
The co-borrowers under the Financing will be the Company and Vonage America Inc., its wholly owned subsidiary. Obligations under the Financing will be guaranteed, fully and unconditionally, by the Company's other U.S. subsidiaries (together with the borrowers, the "Credit Parties"), and may in the future be guaranteed by Vonage Limited, a United Kingdom subsidiary of the Company.
The lenders under the First Lien Senior Facility and the Second Lien Senior Facility and the purchasers of the Convertible Notes will be Silver Point Finance, LLC ("Silver Point"), certain of its affiliates, other third parties and affiliates of the Company. The Company and its financial advisor approached a limited number of qualified institutional buyers and institutional accredited investors, including holders of the Company's existing convertible notes. Parties were not permitted to participate in the purchase of Convertible Notes unless they or one of their affiliates also agreed to be a lender in the First Lien Senior Facility or the Second Lien Senior Facility.
The following descriptions summarize the material terms of the Financing as provided in the Credit Documentation.
First Lien Senior Facility
The loans under the First Lien Senior Facility will mature in October 2013. The loans under the First Lien Senior Facility will be issued at an original issuance discount of $7.2 million. Principal amounts under the First Lien Senior Facility will be repayable in quarterly installments of approximately $0.3 million for each quarter ending December 31, 2008 through September 30, 2011 and approximately $3.3 million for each quarter ending December 31, 2011 through September 30, 2013, with the balance due in October 2013.
Amounts under the First Lien Senior Facility, at the Company's option, will bear interest at:
• the greater of 4.00% and LIBOR plus, in either case, 12.00%, payable on the last day of each relevant interest period or, if the interest period is longer than three months, each day that is three months after the first day of the interest period and the last day of such interest period, or
• the greater of 6.75% and the higher of (i) the rate quoted in The Wall Street Journal, Money Rates Section as the Prime Rate as in effect from time to time and (ii) the federal funds effective rate from time to time plus 0.50% plus, in either case, 11.00%, payable on the last day of each month in arrears.
Certain events could trigger prepayment obligations under the First Lien Senior Facility. If the Company has more than $75 million of specified unrestricted cash in any quarter after January 1, 2009, it may be obligated to prepay without premium certain amounts. To the extent the Company obtains proceeds from asset sales, insurance/condemnation recoveries or extraordinary receipts, certain prepayments may be required that will be subject to a premium of 8% in year 1, 7% in year 2, 6% in year 3, 5% in year 4 and 3% in the first 10 months of year 5 and no premium thereafter. In addition, any voluntary prepayments or any mandatory prepayments that may be required from proceeds of debt and equity issuances will be subject to a make-whole during the first three years, and thereafter a premium of 5% in year 4 and 3% in the first 10 months of year 5, with the First Lien Senior Facility callable at par thereafter.
The loans under the Second Lien Senior Facility will mature in October 2015. Principal amounts under the Second Lien Senior Facility will be repayable in quarterly installments of $1.8 million commencing the later of: (i) the last day of the fiscal quarter after payment-in-full of amounts under the First Lien Senior Facility and (ii) December 31, 2012, with the balance due in October 2015. Amounts under the Second Lien Senior Facility will bear interest at 20% payable quarterly in arrears and payable in kind, or PIK, beginning December 31, 2008 until the third anniversary of the effective date and thereafter 20% payable quarterly in arrears in cash. If the First Lien Senior Facility has not been refinanced in full by the third anniversary of the effective date, then until such refinancing has occurred 70% of the interest due will be payable in cash with the balance payable in PIK.
After payment-in-full of amounts under the First Lien Senior Facility or in the event mandatory payments are waived by lenders under the First Lien Senior Facility, the Second Lien Senior Facility will be subject to prepayment obligations and premiums consistent with those for the First Lien Senior Facility. Voluntary prepayments for the Second Lien Senior Facility may be made at any time subject to a make-whole.
. . .
The information in Item 1.01 of this report is incorporated by reference.
Pursuant to a note purchase agreement (the "Note Purchase Agreement") with Silver Point and other third party purchasers (the "Purchasers"), on October 19, 2008 the Company agreed to sell up to $18.0 million of the Convertible Notes to the Purchasers. The Company offered and will sell the Notes to the Purchasers in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. The Company relied on this exemption from registration based in part on representations made by the Purchasers in the Note Purchase Agreement.
Additional information pertaining to the Convertible Notes is contained in Item 1.01 and is incorporated herein by reference.
On October 20, 2008, the Company issued a press release announcing the execution of the Credit Documentation. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
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