Vectrus gets $215 million term loan, revolver for spin-off from Exelis

By Marisa Wong

Madison, Wis., Sept. 19 – Vectrus, Inc. entered into a credit agreement on Sept. 17 for $215 million of senior secured financing, according to an 8-K filing with the Securities and Exchange Commission.

The financing consists of a $140 million five-year term loan facility and a $75 million five-year senior secured revolving credit facility.

The full amount of the term loan will be made in a single drawing immediately prior to the consummation of Vectrus’ spin-off from Exelis Inc. Exelis Systems Corp. is the borrower under the credit agreement.

The term loan will amortize in quarterly installments at the following rates: 7.5% in year one, 10% in each of years two and three, 15% in year four and 57.5% in year five. Any unpaid amounts must be repaid at maturity.

The term loan is also subject to mandatory prepayments with 100% of cash proceeds from the incurrence of indebtedness other than permitted debt, 100% of cash proceeds of all non-ordinary course asset sales or other dispositions of property and 50% of excess cash flow with step-downs to 25% and 0% based on certain leverage targets.

Up to $35 million of the revolver will be available for the issuance of letters of credit. The revolver also includes a $10 million swingline facility.

The term loan may be prepaid in whole or in part at any time without premium or penalty, and commitments under the revolver may be reduced in whole or in part at any time without premium or penalty.

Borrowings bear interest at Libor plus an applicable margin based on the leverage ratio ranging from 250 basis points to 300 bps.

During an event of default, overdue principal under the credit facilities may bear interest at a rate 200 bps in excess of the otherwise applicable rate.

On and after the funding date, the company will also pay a commitment fee on the undrawn portion of the revolver ranging from 40 bps to 50 bps, depending on the leverage ratio.

The credit facilities contain a number of restrictive covenants. In addition, Vectrus is required to comply with a maximum ratio of total consolidated indebtedness to consolidated EBITDA of 3.50 to 1.00, with step-downs to 3.00 to 1.00 beginning with the third fiscal quarter of 2015 and 2.75 to 1.00 beginning with the first fiscal quarter of 2016. The company must also maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of 4.50 to 1.00.

JPMorgan Chase Bank, NA is the administrative agent. J.P. Morgan Securities LLC, SunTrust Robinson Humphrey, Inc. and U.S. Bank NA are the joint lead arrangers and joint bookrunners. SunTrust Bank and U.S. Bank are the syndication agents.

Vectrus is a military and government services company based in Colorado Springs, Colo.

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