Item
1.01 Entry
into a Material Definitive Agreement.
On June
4, 2010 (the “Closing Date”), Dycom Industries, Inc. (“Dycom”) entered into a
Credit Agreement (the “Agreement”) with certain lenders named therein (the
“Lenders”), Bank of America, N.A. (“Bank of America”), as Administrative Agent,
Swingline Lender and L/C Issuer, Banc of America Securities LLC and Wells Fargo
Securities, LLC, as Joint Lead Arrangers and Joint Book Managers, Wells Fargo
Bank, National Association, as Syndication Agent, and Branch Banking and Trust
Company, RBS Citizens, N.A. and PNC Bank, National Association, as
Co-Documentation Agents (collectively, the “Banks”). Dycom may use
the proceeds of the Agreement to refinance certain indebtedness, for working
capital, to finance acquisitions on certain conditions set forth in the
Agreement and for other general corporate purposes. The Agreement replaces
Dycom’s Prior Agreement described below under Item 1.02, which was due to expire
in September 2011. As of June 9, 2010, no borrowings were outstanding
under the Agreement. Outstanding letters of credit under the Prior
Agreement were transferred to the Agreement.
The
Agreement, which is filed as an exhibit to this Form 8-K, provides for a maximum
revolver commitment from the Lenders of $225,000,000 and terminates on
June 4, 2015. This maximum revolver commitment may be reduced by
Dycom from time to time in accordance with the terms of the
Agreement. The Agreement contains a sublimit of $100,000,000 for the
issuance of letters of credit. Amounts borrowed under the Agreement
may be repaid and reborrowed from time to time. Subject to certain
conditions, the Agreement provides for the ability to enter into one or more
incremental facilities, either by increasing the revolving commitments under the
Agreement and/or in the form of term loans, in an aggregate amount not to exceed
$75,000,000.
Borrowings
under the Agreement (other than Swingline Loans (as defined in the Agreement))
bear interest at a rate equal to either (a) the Administrative Agent’s base
rate, described in the Agreement as the highest of (i) the Federal Funds Rate
plus 0.50%; (ii) the Administrative Agent’s prime rate; and (iii) the Eurodollar
Rate (described in the Agreement as the British Bankers Association LIBOR Rate,
divided by one (1) minus the Eurodollar Reserve Percentage (as defined in the
Agreement)) plus 1.00%, or (b) the Eurodollar Rate (described in the Agreement
as the British Bankers Association LIBOR Rate, divided by one (1) minus the
Eurodollar Reserve Percentage (as defined in the Agreement)), plus, in each
case, an applicable margin based upon Dycom’s consolidated leverage
ratio. Swingline Loans bear interest at a rate equal to the
Administrative Agent’s base rate plus a margin based upon Dycom’s consolidated
leverage ratio. Based on Dycom’s current consolidated leverage ratio,
borrowings would be eligible for a margin of 1.50% for revolving borrowings
based on the Administrative Agent’s base rate and 2.50% for revolving borrowings
based on the Eurodollar Rate.
Under
the Agreement, Dycom agrees to pay a facility fee, payable quarterly, at rates
that range from 0.500% to 0.625% of the unutilized commitments depending on
Dycom’s consolidated leverage ratio.
The
payments under the Agreement are guaranteed by certain subsidiaries of Dycom and
secured by a pledge of (i) 100% of the equity of the material domestic
subsidiaries of Dycom and (ii) 100% of the non-voting equity and 65% of the
voting equity of first-tier material foreign subsidiaries of Dycom, in each
case, excluding certain unrestricted subsidiaries.
The
Agreement contains affirmative and negative covenants which are customary for
similar credit arrangements, including limitations on Dycom and its subsidiaries
with respect to indebtedness, liens, investments, distributions, mergers and
acquisitions, disposition of assets, sale-leaseback
transactions, transactions with affiliates and capital expenditures (other
than capital expenditures charged to current operations and made for normal
replacements and maintenance). The Agreement contains financial
covenants which require Dycom to (i) maintain a consolidated leverage ratio
of not greater than 3.00 to 1.00, as measured at the end of each fiscal quarter
and (ii) maintain a consolidated interest coverage ratio of not less than
2.75 to 1.00 for fiscal quarters ending July 31, 2010 through April 28, 2012 and
not less than 3.00 to 1.00 for the fiscal quarter ending July 28, 2012 and
each fiscal quarter thereafter, as measured at the end of each fiscal
quarter.
Upon the
occurrence of certain bankruptcy and insolvency events with respect to Dycom or
certain of its subsidiaries, the revolving commitments of the lenders
automatically terminate and all amounts due under the Agreement and other loan
documents become immediately due and payable. If certain other events
of default occur and are continuing, including failure to pay the principal and
interest when due, a breach of a negative covenant, failure of a guarantee to be
in full force and effect, the entry of a judgment or decree against Dycom, the
subsidiary guarantors or certain of their respective subsidiaries above a
certain specified amount, or failure to perform any other requirement in the
Agreement or the other loan agreements, then, with the consent of or upon the
request of the Lenders holding a majority of loans, the revolving commitments of
the Lenders will terminate and all amounts due under the Agreement and other
loan documents become immediately due and payable.
Certain
of the Lenders and their affiliates have provided, from time to time, and may
continue to provide, investment banking, commercial banking, financial and other
services to Dycom, including letters of credit, depository and
account processing services, for which Dycom has paid and intends to pay
customary fees.
The
foregoing description of the Agreement does not purport to be complete and is
qualified in its entirety by reference to such agreement, which is attached
hereto as Exhibit 10.1 and is incorporated herein by reference.
Item
1.02
Termination of a Material Definitive Agreement.
Upon
execution of the Agreement described under Item 1.01 above, effective June 4,
2010, Dycom terminated its prior Credit Agreement, dated as of September 12,
2008 (the “Prior Agreement”), among Dycom, Wells Fargo Bank (as
successor-in-interest to Wachovia Bank, National Association), as Administrative
Agent, and the other lenders parties thereto. At the time of
termination, there were no outstanding borrowings and all outstanding letters of
credit thereunder were transferred to the Agreement, a description of which is
contained under Item 1.01 of this Form 8-K. Dycom did not incur any
material early termination penalties in connection with the termination of the
Prior Agreement. Under the Prior Agreement, Dycom could borrow a
maximum of $210,000,000. The Prior Agreement also provided for two
one-year extensions and the ability to borrow an incremental $85,000,000 under
certain conditions.
Borrowings
under the Prior Agreement bore interest, at Dycom’s option, at either (a) the
Administrative Agent’s base rate, described in the Prior Agreement as the higher
of the annual rate of the lead bank’s prime rate or the federal funds rate plus
0.50%, or (b) LIBOR plus, in either case, a spread based upon Dycom’s
consolidated leverage ratio. Under the Prior Agreement, Dycom agreed
to pay a facility fee, payable quarterly, at rates that ranged from 0.500% to
0.750% of the unutilized commitments depending on Dycom’s consolidated leverage
ratio. The payments under the Prior Agreement were guaranteed by
certain subsidiaries of Dycom and secured by a pledge of a certain percentage of
the equity of the material domestic subsidiaries and certain material foreign
subsidiaries of Dycom, in each case, excluding certain unrestricted
subsidiaries.
The Prior
Agreement contained affirmative and negative covenants that were customary for
similar credit arrangements, including limitations on Dycom and its subsidiaries
with respect to indebtedness, liens, investments, distributions, mergers and
acquisitions, disposition of assets, sale-leaseback transactions and
transactions with affiliates, and also contained certain financial
covenants.
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Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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As
described above under Item 1.01 of this Form 8-K, on June 4, 2010, Dycom entered
into the Agreement. As of June 9, 2010, no amounts have been borrowed
under the Agreement and all outstanding letters of credit under the Prior
Agreement have been transferred to the Agreement.
Item
9.01 Financial
Statements and Exhibits.
(d) Exhibits
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10.1
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Credit
Agreement dated as of June 4, 2010 among Dycom, as the Borrower, the
subsidiaries of Dycom identified therein, as the Guarantors, certain
lenders named therein, Bank of America, N.A., as Administrative Agent,
Swingline Lender and L/C Issuer, Banc of America Securities LLC and Wells
Fargo Securities, LLC, as Joint Lead Arrangers and Joint Book Managers,
Wells Fargo Bank, National Association, as Syndication Agent, and Branch
Banking and Trust Company, RBS Citizens, N.A. and PNC Bank, National
Association, as Co-Documentation
Agents.
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99.1
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Press
release dated June 7, 2010 by Dycom Industries, Inc announcing the
execution of the Agreement and the termination of the Prior
Agreement.
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