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| Item 1.01 | Entry into a Material Definitive Agreement. |
First Amendment to Third Amended & Restated Credit Agreement
On April 3, 2023, Ubiquiti Inc. (the “Company”), as borrower, and certain domestic subsidiaries, as guarantors (the “Domestic Guarantors”), entered into a first amendment (the “First Amendment”) to third amended and restated credit agreement (the “Credit Agreement”, and as amended by the First Amendment, the “Amended Credit Agreement”) with the financial institutions named as lenders therein and Wells Fargo Bank, National Association, as administrative agent and collateral agent for the lenders (in such capacity, the “Agent”).
The First Amendment added a new term loan facility in an aggregate principal amount of $250 million (the “First Amendment Term Loan”) in addition to the $700 million outstanding senior secured revolving credit facility (the “Revolving Credit Facility”) and the initial term loan facility (the “Initial Term Loan Facility”) in an initial amount of $500 million previously advanced under the Credit Agreement. Additionally, the First Amendment (a) provided that all loans bearing interest at a LIBOR rate under the Credit Agreement (each, a “LIBOR Rate Loan”) and the applicable interest periods in respect of such LIBOR Rate Loans under the Credit Agreement will not be renewed or extended and, upon the expiration or earlier termination of such interest periods, such LIBOR Rate Loans will be (i) repaid or (ii) converted to loans accruing at Base Rate (as defined in the Amended Credit Agreement) or Adjusted Term SOFR (as defined below), at the Company’s option; (b) implemented “Adjusted Term SOFR” as a reference rate for borrowings under the Amended Credit Agreement, and (c) modified the definition of “Base Rate” to replace the LIBOR rate component with Adjusted Term SOFR, in addition to other modifications or inclusion of other definitions to reflect customary terms. Adjusted Term SOFR is defined as Term SOFR (as defined in the Amended Credit Agreement) plus 0.10% per annum; provided that Adjusted Term SOFR shall in no event be less than 0.00%. All other material terms and provisions of the Amended Credit Agreement remain substantially identical to the terms and provisions of the Credit Agreement in place immediately prior to the effectiveness of the First Amendment. The maturity date for the Revolving Credit Facility and the Initial Term Loan Facility remains March 30, 2026.
The First Amendment Term Loan is payable in quarterly installments equal to $3.125 million, commencing with the quarter ended June 30, 2023, subject to certain adjustments to individual installments as provided in the Amended Credit Agreement. If not sooner paid, the First Amendment Term Loan must be paid in full, together with accrued interest thereon, on March 30, 2026, which is the same maturity date for the Revolving Credit Facility and Initial Term Loan Facility. The First Amendment Term Loan may be prepaid at any time without penalty or premium.
The First Amendment Term Loan bears interest, at the Company’s option, at either (i) a floating rate per annum equal to Base Rate plus a margin of between 1.00% and 1.75%, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter or (ii) a floating per annum rate equal to the applicable Adjusted Term SOFR rate for a specified period, plus a margin of between 2.00% and 2.75%, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter. A default interest rate shall apply on all obligations during certain events of default under the Amended Credit Agreement at a rate per annum equal to 2.00% above the applicable interest rate. The Company is obligated to pay Agent fees customary for an amendment to a facility of this size and type.
The proceeds from the First Amendment Term Loan are available for working capital and general corporate purposes that comply with the terms of the Credit Agreement.
The obligations of the Company and certain domestic subsidiaries under the First Amendment Term Loan are required to be guaranteed by the Domestic Guarantors and are collateralized by substantially all assets (excluding intellectual property) of the Company and the Domestic Guarantors.
Agent and the lenders and other financial institutions party to the First Amendment, and certain of their respective affiliates, have provided, and in the future may provide, financial, banking and related services to the Company. These parties have received, and in the future may receive, compensation from the Company for these services.
The foregoing is a summary description of certain terms of the First Amendment and does not purport to be complete, and it is qualified in its entirety by reference to the full text of the First Amendment, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.