Comtech adds flexibility, simplicity to $400 million credit agreement

By Wendy Van Sickle

Columbus, Ohio, June 7 – Comtech Telecommunications Corp. amended its $400 million credit agreement dated Feb. 23, 2016 with Citibank, NA as administrative agent to increase operating and acquisition flexibility and simplify calculations of its financial covenants, according to an 8-K filing with the Securities and Exchange Commission.

The credit agreement continues to provide for a $250 million senior secured term A loan facility and an up to $150 million senior secured revolving loan facility with a $25 million letter-of-credit sublimit. Both facilities continue to mature Feb. 23, 2021.

The June 6 amendment to the credit agreement resulted in the following:

• The consolidated EBITDA definition will now more closely align with the company's Adjusted EBITDA metric by eliminating favorable adjustments to operating income related to settlements of TeleCommunication Systems, Inc. intellectual property matters;

• The leverage ratio will now be calculated on a “gross” basis using the quotient of total debt divided by the company's trailing 12-month consolidated EBITDA. The prior leverage ratio was calculated on a “net” basis but did not include a reduction for any cash or cash equivalents above $50 million;

• The fixed charge coverage ratio will now include a deduction for all cash dividends, regardless of the amount of the company's cash and cash equivalents, and the related allowable quarterly dividend amount will now align with the company's current quarterly dividend target of $0.10 per common share;

• Final payment of the term loan facility was reduced by $22.5 million through increased borrowings from the revolver; and

• Leverage ratios will be adjusted, in certain conditions, to provide for additional flexibility for the company to make acquisitions.

• Borrowings under the facilities continued to bear interest at Libor plus 225 basis points to 375 bps, based on the company’s leverage ratio. The commitment fee ranges from 35 bps to 50 bps, also depending on leverage.

The facilities were used to finance in part the acquisition of TeleCommunication Systems and its subsidiaries and were and are intended to be used to pay related transaction fees and expenses.

Comtech is a Melville, N.Y.-based designer, developer, producer and marketer of products, systems and services for advanced communications solutions. TeleCommunication Systems is an Annapolis, Md.-based provider of wireless communications solutions.

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