Varex Imaging amends credit agreement to modify financial covenants

By Sarah Lizee

Olympia, Wash., June 4 – Varex Imaging Corp. amended its credit agreement on Wednesday with Bank of America, NA as administrative agent to modify financial covenants, according to an 8-K filing with the Securities and Exchange Commission.

The amendment increases the maximum amounts permitted under the consolidated total leverage ratio and senior secured leverage ratio covenants for various fiscal quarters, permits specified amounts of unrestricted cash of the company to be netted from outstanding debt in the calculation of those leverage ratios and modifies the definition of EBITDA used to calculate those leverage ratios.

The amendment also modifies the consolidated fixed charge coverage ratio covenant by decreasing the amount of capital expenditures that must be deducted from EBITDA in the calculation of that ratio and decreasing the amount of principal amortization that must be included in the denominator of that ratio through Oct. 2, 2021.

Also, the amendment replaces the existing allowance for uncommitted incremental increases to the term loan and revolving commitments with an allowance for up to $100 million in aggregate uncommitted incremental commitments for those facilities under the credit agreement.

The amendment also permits the company to incur additional incremental debt outside of the credit agreement of up to $300 million, and up to $100 million of which may be secured. Among other things, the credit agreement allows the company to issue convertible debt under this allowance for additional incremental debt.

The proceeds of additional incremental debt, if unsecured, must be applied to prepay up to $50 million of outstanding term loans and pay down up to $25 million of outstanding revolving loans, with a corresponding reduction to the revolving loan commitments under the credit agreement. If secured, it must be applied to pay down up to $75 million of outstanding revolving loans, but without permanent reduction to the revolving loan commitments, less any amounts paid down from proceeds of unsecured additional incremental debt.

The amendment also allows the company to enter into some customary hedging transactions in connection with permitted convertible debt. The amendment provides that up to 25% of the proceeds from any future equity issuance by the company may be retained by the company and not applied to the debt outstanding under the credit agreement.

Finally, the amendment provides for adjustments to various existing operational covenant carve-outs and allowances.

Varex Imaging is a Salt Lake City-based designer and manufacturer of X-ray imaging components.

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