JPMorgan Chase and a syndicate of banks arranged a five-year, $180 million term loan and a $70 million revolving credit facility to refinance existing debt for Avid, a media and entertainment technology provider.
JPMorgan, Citizens Bank, PNC Capital Markets, Silicon Valley Bank and Truist Securities served as joint bookrunners and joint lead arrangers on the facility, with JPMorgan serving as administrative agent and Citizens, PNC, Silicon Valley Bank and Truist Bank serving as co-syndication agents.
The proceeds from the new term loan, plus available cash on hand, were used to repay outstanding borrowings of $201 million under Avid’s existing credit facility with Cerberus Business Finance, which was terminated. The new revolving credit facility, which was undrawn at closing, can be used for working capital, other general corporate purposes and for other permitted uses.
“The continued growth of Avid’s software subscriptions and our improving business performance and free cash flow profile in recent periods have enabled us to put in place a cost-effective capital structure. With the completion of the refinancing, we believe we are well positioned to execute on our strategy and continue improving our profitability and free cash flow generation,” Jeff Rosica, CEO and president of Avid, said.
“We are pleased with the successful execution of our new credit facility,” Ken Gayron, executive vice president and CFO of Avid, said. “We have capitalized on the recent successes in our business to significantly reduce our cost of debt, further strengthening our balance sheet, extending our maturities and providing additional financial flexibility and liquidity. We experienced very strong demand for this transaction, demonstrating the confidence that our lenders have in Avid’s current and long-term outlook. The new facility further improves our capital structure, building upon the retirement of our convertible notes in June 2020, and reduces our outstanding debt by $21 million. In addition, it provides a significant reduction from our prior interest rate and, with the initial effective interest rate of 3.25%, we expect our annual interest expense to be approximately $10 million lower in 2021 than in 2020.”
The new term loan has an initial interest rate of LIBOR plus an applicable margin of 3% with a 0.25% LIBOR floor. The applicable margin on the term loan and the revolving credit facility ranges from 2% to 3.25%, depending on leverage. The credit agreement contains two financial covenants: (i) a requirement to maintain a total net leverage ratio, as defined in the credit agreement, of no more than 4.00 to 1.00 through June 30, 2021, with step downs thereafter, and (ii) a requirement to maintain a fixed charge covenant ratio, as defined in the credit agreement, of no less than 1.20 to 1.00. Both the term loan and the revolving credit facility mature on Jan. 5, 2026.
Editor’s Note: The original headline for this article incorrectly stated that Avid received $2.5B in debt financing, when it actually received $250 million. The error has been fixed. ABF Journal apologizes for the error.