01—Abstract
Summary
Summary of the 8-K filed October 1, 2018. Cited figures are marked; the original filing is the authoritative source.
CIENA CORP (CIEN) filed an 8-K on October 1, 2018, primarily announcing the refinancing and expansion of its senior secured term loan facility.
The company replaced its existing $394 milliona term loan maturing in 2022 with a new $700 million term loan due in September 2025. This move increased the company's total term loan principal by $306 million, providing additional liquidity. These net proceeds are intended to partially fund the repayment of Ciena's 3.75% senior convertible notes due October 15, 2018, thereby managing its upcoming debt obligations.
The new facility offers flexibility in interest rate options (LIBOR or base rate) and includes provisions for potential future incremental borrowings up to a certain leverage ratio. Additionally, Ciena announced the completion of its acquisition of DonRiver Holdings, LLC, a software and services company focused on network inventory management, which is expected to enhance its OSS capabilities.
02—Key points
Key Highlights
- Ciena refinanced its existing $394 million senior secured term loan and incurred an additional $306 million, creating a new $700 million term loan facility due September 28, 2025.
- The net proceeds from the new term loan, approximately $300 million, will be used to support the repayment of Ciena's 3.75% senior convertible notes due October 15, 2018.
- The Refinancing Term Loan offers a choice between LIBOR plus 2.00% or a base rate plus 1.00% for interest, with floors on both rates.
- The credit agreement was amended to increase the 'accordion' feature, allowing for future incremental term loans subject to specified leverage and coverage ratios.
- Ciena completed the acquisition of DonRiver Holdings, LLC, a specialist in federated network and service inventory management solutions.
- The acquisition of DonRiver Holdings is expected to strengthen Ciena's position in the Operational Support Systems (OSS) environment.
- The new term loan matures in September 2025, extending the maturity from the original loan which was set to mature in January 2022.
03—Questions
Frequently Asked Questions
What is the primary purpose of the new $700 million term loan?
The primary purpose is to refinance Ciena's existing $394 million senior secured term loan and to raise an additional $306 million. The net proceeds will enhance the company's liquidity and are intended to partially fund the repayment of Ciena's upcoming 3.75% senior convertible notes due October 15, 2018.
What are the key terms of the new Refinancing Term Loan?
The new loan matures on September 28, 2025. It amortizes quarterly at 0.25% of the principal amount, with the balance due at maturity. Ciena can elect to pay interest based on either LIBOR (plus 2.00%, with a 0.00% floor) or a base rate (plus 1.00%, with a 1.00% floor). Mandatory prepayments are required under certain events, and voluntary prepayments are permitted, though a 1% premium may apply before March 28, 2019, if refinanced with certain other debt.
What is the significance of the DonRiver Holdings acquisition?
The acquisition of DonRiver Holdings, a company focused on federated network and service inventory management, is expected to bolster Ciena's capabilities within the Operational Support Systems (OSS) environment. This move likely aims to strengthen Ciena's end-to-end networking solutions for service providers.
How does the new credit agreement enhance Ciena's financial flexibility for future growth?
The credit agreement's 'accordion' feature has been modified to allow Ciena to incur additional incremental term loan facilities. The maximum amount for these facilities is tied to specific leverage ratios, such as a Total Secured Net Leverage Ratio not exceeding 2.00 to 1.00 for secured debt, or an Interest Coverage Ratio of at least 2.00 to 1.00 for unsecured debt, providing a framework for potential future funding needs.
04—Continue