Molina Healthcare extends revolver, increases it to $500 million

By Angela McDaniels

Tacoma, Wash., Jan. 3 – Molina Healthcare, Inc. amended and restated the credit agreement for its revolving credit facility on Tuesday to increase the commitments to $500 million from $250 million and to extend the revolver to Jan. 31, 2022 from June 12, 2020, according to an 8-K filing with the Securities and Exchange Commission.

The amendment and restatement also provided for the following changes:

• An amendment to the provision regarding commitment increases to provide that the amount of all increases to the aggregate revolving commitments plus the aggregate initial principal amount of all incremental term loans will not exceed $150 million (as opposed to the $100 million limitation prior to the amendment) during the term of the credit agreement;

• The addition of definitions for bridge senior unsecured indebtedness, consolidated fixed-charge coverage ratio, consolidated fixed charges, designated non-cash consideration, disqualified stock, fair market value, first amendment, non-recourse debt, restricted investment, restricted subsidiary, specified cash and unrestricted subsidiary;

• An amendment to the definition of consolidated net leverage ratio to permit additional netting of cash proceeds held in escrow of up to $500 million for debt incurred from time to time to consummate a permitted acquisition or refinance existing debt;

• An amendment to the consolidated net leverage ratio financial covenant to set the ratio at 4 to 1 at all times, with no step down;

• The deletion of the statutory net worth financial covenant;

• An amendment to the definition of consolidated adjusted EBITDA to increase the cap on the amount of costs and synergies attributable to a permitted acquisition from 10% to 20%;

• An amendment to the definition of LC commitment to increase the portion of the aggregate revolving commitments that may be used by the company for the issuance of letters of credit in an aggregate face amount not to exceed $100 million (as opposed to the $75 million limitation prior to the amendment);

• An amendment to the definition of permitted acquisition to provide that a pro forma compliance certificate is required only if the consideration for the acquisition exceeds 10% of consolidated total assets immediately prior to giving effect to such acquisition;

• An amendment to the limitation on the ability of the company to make restricted payments to permit additional restricted payments and restricted investments in an amount equal to 50% of consolidated net income for the period from the closing date of the amendment through the date of the determination (taken as one period) plus 100% of the net cash proceeds of equity issuances of the company after the closing date plus returns on unrestricted investments made after the closing date plus returns on unrestricted subsidiaries designated after the closing date or redesignated as a restricted subsidiary; provided that, at the time of such restricted payment, the consolidated fixed charge coverage ratio is at least 2 to 1 determined on a pro forma basis;

• An amendment to permit the company to designate unrestricted subsidiaries;

• An amendment to the negative covenant with respect to additional debt to allow acquired debt in an amount not to exceed the greater of $75 million and 1.5% of consolidated total assets (as opposed to the $75 million threshold in effect prior to the amendment);

• An amendment to the negative covenant with respect to debt to allow, subject to certain conditions, the incurrence by the company of bridge senior unsecured debt maturing prior to the revolving commitment termination date so long as such debt is automatically converted into long-term debt maturing no earlier than the date that is 91 days after the revolving commitment termination date;

• An amendment to the negative covenant with respect to payments on the 2020 convertible notes or the 2044 convertible notes to delete the requirement that the company demonstrate liquidity of $150 million;

• An amendment to the negative covenant with respect to asset sales to delete the cap on asset sales and to permit the company to designate non-cash consideration received in connection with an asset sale, as cash consideration, in an aggregate amount not to exceed the greater of $200 million or 3.5% of consolidated total assets;

• An increase in the material indebtedness threshold from $30 million to $50 million and comparable increases in the default thresholds for an ERISA event and with respect to a judgment or order for the payment of money;

• An expansion of the definition of HMO subsidiary to include any domestic subsidiary, substantially all the assets of which consist primarily of the capital stock of an HMO subsidiary;

• An expansion of the definition of insurance subsidiaries to include any domestic subsidiary, substantially all the assets of which consist of capital stock of an insurance subsidiary;

• A change to the thresholds in the definition of material domestic subsidiary to replace the $10 million threshold with 1% of the company’s consolidated total revenues for a specified 12-month period or 2% of consolidated total assets as of a specified date; provided, that if at any time all domestic subsidiaries (other than an HMO subsidiary or insurance subsidiary) that are not guarantors account in the aggregate for greater than 10% of the company’s consolidated total revenues during a specified 12-month period or 10% of consolidated total assets as of a specified date, the company is required to cause one or more subsidiaries to join as guarantors so that immediately thereafter the domestic subsidiaries that are not guarantors do not exceed either of the foregoing thresholds; and

• The elimination of the requirement that the pro forma budget for the succeeding fiscal year be broken out on a quarterly basis.

In addition, effective as of the closing date, all guarantors immediately prior to the closing date other than Molina Information Systems, LLC, Molina Pathways, LLC and Pathways Health and Community Support LLC were automatically and unconditionally released as guarantors.

SunTrust Bank is the administrative agent.

Long Beach, Calif.-based Molina Healthcare is a health management organization that works with Medicaid patients and other government assistance programs.

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