8-KMaterial AgreementsFinancial EventsOther Events

COHERENT CORP. 8-K Report, Material Agreement (Mar 7, 2019)

Filed March 7, 2019For Securities:COHR

Summary

This 8-K filing by II-VI Incorporated (COHR) on March 7, 2019, primarily details the company's entry into a significant Credit Agreement on March 4, 2019. This agreement establishes a new $1.625 billion senior secured credit facility, comprising a $1.175 billion Term A loan and a $450 million revolving credit facility. The primary purpose of these new facilities is to finance the pending acquisition of Finisar Corporation, including the cash portion of the merger consideration and associated fees. The financing will be complemented by a separately committed $800 million Term B loan facility and existing company cash. This strategic move is a crucial step in II-VI's acquisition of Finisar, aiming to integrate the two companies and realize anticipated synergies.

Key Highlights

  • 1II-VI Incorporated entered into a new Credit Agreement on March 4, 2019, for $1.625 billion in senior secured financing.
  • 2The new credit facility includes a $1.175 billion five-year Term A loan and a $450 million five-year revolving credit facility.
  • 3Proceeds from the new credit facility, along with an $800 million Term B loan and existing cash, will fund the acquisition of Finisar Corporation.
  • 4The new credit facilities will be collateralized by a first priority lien on substantially all assets of II-VI and its subsidiaries, including Finisar post-merger.
  • 5Upon closing the Finisar merger, the new credit facilities will be used to refinance II-VI's existing credit facilities and repay Finisar's outstanding convertible notes.
  • 6The agreement includes customary covenants regarding leverage ratios (initially not to exceed 5.00:1.00 total net leverage) and interest coverage (not less than 3.00:1.00).
  • 7The filing also notes a Third Amendment to the Current Credit Agreement, confirming that the entry into the New Credit Agreement does not constitute a default under the existing agreement.

Frequently Asked Questions

The primary purpose of the new Credit Agreement, entered into on March 4, 2019, is to secure financing for II-VI Incorporated's pending acquisition of Finisar Corporation. The funds will be used to pay the cash portion of the merger consideration and related fees and expenses.

II-VI has secured a total of $1.625 billion under the new senior secured credit facilities. This includes a $1.175 billion five-year Term A loan facility and a $450 million five-year revolving credit facility. This is in addition to a separately committed $800 million Term B loan facility.

Upon the consummation of the Finisar merger, the new credit facilities will be used to refinance II-VI's current credit facilities and to repay Finisar's outstanding convertible notes totaling approximately $576 million.

The new credit facilities require II-VI to maintain certain financial covenants, including a consolidated interest coverage ratio of not less than 3.00:1.00 and a consolidated total net leverage ratio that starts at not greater than 5.00:1.00 and steps down over time to 4.00:1.00. Failure to comply with these covenants could lead to an event of default.