Generac restates credit agreement for $2 billion term loan A, revolver

By Marisa Wong

Los Angeles, June 30 – Generac Holdings Inc. wholly owned subsidiary Generac Power Systems, Inc. and Generac Acquisition Corp. entered into a third amendment on June 29 to the credit agreement dated Feb. 9, 2012 with JPMorgan Chase Bank, NA as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

The amendment establishes a new tranche A term loan facility in an aggregate principal amount of $750 million and a new revolving facility totaling $1.25 billion.

At closing, Generac used $250 million of the term A loans to repay a portion of the existing term B loans under the credit agreement. After giving effect to the prepayment, a total of $530 million of existing term B loans remains outstanding.

The maturity date of the 2022 new facilities is June 29, 2027. However, to the extent the existing term loan B remains outstanding, the maturity date springs to a date that is 90 days prior to the maturity date for the existing term loan B, which is Dec. 13, 2026.

The third amendment further states that the 2022 revolver provides for a swingline commitment in an aggregate principal amount of $25 million, a letter-of-credit sublimit in an aggregate principal amount of $100 million and revolving borrowings in dollars, euros, sterling and other currencies as approved by the administrative agent.

The third amendment also replaces all Libor provisions applicable to the existing term loan B with customary SOFR provisions.

Borrowings under the 2022 new facilities will bear interest at adjusted term SOFR or Sonia plus an applicable margin of 150 basis points. The applicable margin generally ranges from 125 bps to 175 bps, depending on Generac’s total leverage ratio.

Borrowings under the existing term loan B will bear interest at adjusted term SOFR plus an applicable margin of 175 bps.

The 2022 revolver incurs an unused commitment fee of 20 bps on the daily unused amount.

The 2022 tranche A term loan was fully drawn on June 29 and will be repayable in quarterly installments in an amount equal to, with respect to the fiscal quarters ending June 30, 2022 through and including June 30, 2023, 0%; with respect to the fiscal quarters ending Sept. 30, 2023 through and including June 30, 2024, 2.5%; with respect to the fiscal quarters ending Sept. 30, 2024 through and including June 30, 2025, 5%; with respect to the fiscal quarters ending Sept. 30, 2025 through and including June 30, 2026, 7.5%; and with respect to the fiscal quarters ending Sept. 30, 2026 through and including March 31, 2027, 10% of the original principal amount. The remaining principal balance on the term A loans is due and payable at maturity.

The existing term B loans will be repayable in equal quarterly installments in an amount equal to 0.25% of the original principal amount, with the balance due and payable on Dec. 13, 2026. On the restatement date, Generac applied the term loan B prepayment to the remaining amortization payments in the direct order of maturity.

The term A loans and the existing term B loans may be repaid in whole or in part, without premium or penalty, but are also subject to customary mandatory prepayments with respect to asset sales and, solely with respect to the existing term B loans, excess cash flow.

In addition, the amended and restated credit agreement contains the following financial covenants with respect to the 2022 new facilities: total leverage ratio is not to exceed 3.75 to 1.00, or, in the event Generac or its restricted subsidiaries have paid cash consideration in excess of $350 million with respect to a permitted business acquisition, 4.25 to 1.00 for each of the four fiscal quarters following the consummation of the acquisition; and the interest coverage ratio must be at least 3.00 to 1.00.

Proceeds of the loans under the amended and restated credit agreement will be used to finance working capital needs and for general corporate purposes.

In conjunction with the closing of the third amendment, Generac prepaid the total existing outstanding principal balance of the ABL revolving loans under a prior third amended and restated credit agreement with Bank of America, NA as administrative agent. The ABL credit agreement was terminated when the prepayment was made.

Generac is a Waukesha, Wis.-based designer and manufacturer of generators.

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