HMS Holdings enters into $500 million five-year amended agreement

By Tali David

Minneapolis, May 6 - HMS Holdings Corp. entered into a $500 million five-year amended and restated revolving credit agreement on May 3, according to an 8-K filed Monday with the Securities and Exchange Commission.

According to the 8-K, the credit agreement provides for an initial $500 million in revolving credit facilities, and, under specified circumstances, the revolving credit facility can be increased, or one or more incremental term loan facilities can be added, provided that the incremental credit facilities do not exceed in the aggregate the sum of (a) $75 million; plus (b) an additional amount not less than $25 million, so long as the company's total secured leverage ratio, calculated giving pro forma effect to the requested incremental borrowing and other customary and appropriate pro forma adjustment events, including any permitted acquisitions, is no greater than 2.5:1.

Borrowings initially bear interest at Libor plus 200 basis points. After the delivery of HMS's consolidated financial statements for the quarter ending June 30, the margin will range from 150 bps to 225 bps based on the company's consolidated leverage ratio. There is a commitment fee that is initially 50 bps and will range from 37.5 bps to 50 bps, also based on the consolidated leverage ratio.

Principal covenants include a maximum consolidated leverage ratio reducing from 3.5:1 to 3.25:1 over the next two years and a minimum interest coverage ratio of 3:1.

Borrowings under the revolving credit facility will be used to refinance the entire term loan facility under the prior credit agreement and may be used for general corporate purposes, including for acquisitions permitted under the credit agreement.

The prior credit agreement provided for a $450 million secured revolving and term loan credit facility that was set to mature Dec. 16, 2016.

Citibank, NA is the administrative agent. Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Bank of America Merrill Lynch are the joint lead arrangers and joint bookrunners.

HMS is an Irving, Texas-based coordinator of benefits and program integrity services for health-care payers.

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