Merge Healthcare gets $235 million six-year loan at Libor plus 600 bps

By Susanna Moon

Chicago, May 5 - Merge Healthcare Inc. obtained a $235 million six-year term loan at Libor plus 600 basis points with a Libor floor of 1%, according to an 8-K filing with the Securities and Exchange Commission.

The company entered into a new senior secured credit facility on April 29 with Guggenheim Corporate Funding, LLC as the administrative agent, lead arranger and collateral agent.

At closing, Merge used proceeds of the term loan to repay all outstanding debt under its previous credit facilities.

The term loan will amortize at 5% of the principal amount of the term loan, payable in equal quarterly installments, with the remainder due at maturity.

The company may prepay any borrowing under the credit agreement, subject to minimum prepayment requirements, the payment of customary breakage costs and, in certain cases, the payment of a prepayment premium.

The company is required to prepay its outstanding borrowings under the credit agreement with proceeds from asset sales in excess of $1 million, casualty and condemnation events in excess of $1 million and issuances of debt or certain disqualified capital stock. The company is also required to prepay the loans with 75% of the excess cash flow, which will be reduced to 50% and to 25% after the achievement of certain total leverage ratios of the company for the prior fiscal year (or, in the case of fiscal year 2014, for the period beginning on July 1, 2014 and ending on Dec. 31, 2014), less voluntary prepayments made by the company during the fiscal year, provided that no excess cash flow prepayment is required to the extent that the prepayment would cause the aggregate amount of cash and cash equivalents of the company and amounts available to be drawn by the company under revolving credit lines to be less than $20 million.

The covenants require the company to maintain a total leverage ratio of no more than 6.5 times as of the end of the first quarter of 2015 and decreasing to 5 times by the end of the second quarter of 2017. The company must also maintain an interest coverage ratio of no less than 2.15 times initially and rising to 2.75 times by the end of the second quarter of 2017.

Merge Healthcare is a Chicago-based provider of software for the storage and sharing of medical images.

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