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Item 1.01
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Entry into a Material Definitive Agreement.
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Credit Agreement and Supplemental Indenture
The information set forth in Item 2.03 is incorporated herein by reference.
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Item 1.02
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Termination of a Material Definitive Agreement.
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On August 12, 2021 (the “Closing Date”), Adtalem Global
Education Inc. (the “Company”) repaid in full all outstanding indebtedness and obligations under and terminated the Prior Facility (as defined below).
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Item 2.01
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Completion of Acquisition or Disposition of Assets.
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As previously disclosed, the Company entered into a Membership Interest Purchase Agreement, dated as of September 11, 2020 (as amended
from time to time, the “Agreement”), with Laureate Education, Inc. (“Seller”). On the Closing Date, the Company completed its acquisition from Seller of all of the issued and outstanding equity interests in Walden e-Learning, LLC (“e-Learning”),
and its subsidiary, Walden University, LLC (together with e-Learning, “Walden”), in exchange for an aggregate purchase price of approximately $1.480 billion in cash, subject to certain adjustments set forth in the Agreement (the “Acquisition”).
The Company funded the purchase price with a combination of (i) loans under the Term Facility (as defined below), (ii) the proceeds from the sale of the Notes (as defined below) issued by a subsidiary of the Company and (iii) cash on hand.
The foregoing description of the Acquisition does not purport to be complete and is qualified in its entirety by reference to the full
text of the Agreement, a copy of which is filed as Exhibits 2.1 and 2.2 hereto, and are incorporated herein by reference.
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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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Credit Agreement
On the Closing Date, the Company entered into a new credit agreement (the “Credit Agreement”) among the Company, as borrower, the
lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent. The Credit Agreement provides for senior secured credit facilities in the form of $850.0 million in aggregate principal amount of term
loans (the “Term Facility”) and $400.0 million of revolving capacity (with a $400.0 million sublimit for letters of credit and a $50.0 sublimit for swingline loans) (the “Revolving Facility, and together with the Term Facility, the “Credit
Facility”). The proceeds from the Term Facility, together with cash on hand, were used to (i) prepay in full all amounts outstanding under that certain credit agreement, dated as of April 13, 2018 (as amended from time to time, the “Prior
Facility”), among the Company, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, (ii) consummate the Acquisition and (iii) pay fees and expenses related to the prepayment of the Prior Facility and
the consummation of the Acquisition. The proceeds from the Revolving Facility will be used to finance ongoing working capital needs and for general corporate purposes. As a result of such prepayment, the Prior Facility was terminated and the
guarantees and all liens granted thereunder were released.
Borrowings under the Term Facility bear interest at the Company’s option at a rate per annum equal to LIBOR plus an applicable margin
ranging from 4.00% to 4.50% for eurocurrency term loan borrowings or 3.00% to 3.50% for ABR borrowings and borrowings under the Revolving Facility bear interest at a rate per annum equal to LIBOR plus an applicable margin ranging from 3.75% to
4.25% for LIBOR borrowings or 2.75% to 3.25% for ABR borrowings, in each case depending on the Company’s net first lien leverage ratio for such period. Undrawn commitments under the Revolving Facility are subject to a commitment fee at a rate
per annum of 0.25% of the undrawn revolving commitments and letters of credit are subject to a 0.125% fronting fee and other customary administrative charges. Borrowings may be made and letters of credit may be issued in U.S. dollars and
certain other permitted currencies. The Credit Facility contains customary ARRC hardwired benchmark replacement language.
On the last day of each fiscal quarter commencing on March 31, 2022, the Company is required to make amortization payments equal to
0.25% of the aggregate principal amount of term loans outstanding immediately after the Closing Date. The Company is permitted to make voluntary prepayments of the loans, without premium or penalty, from time to time, and is obligated to make
mandatory prepayments out of the proceeds of certain asset sales and other recovery events and debt issuances. Borrowings under the Term Facility mature seven years after the Closing Date, and borrowings under the Revolving Facility mature,
and the commitments thereunder terminate, five years after the Closing Date.
Under the terms of the Credit Agreement, beginning on the fiscal quarter ending December 31, 2021 and through December 31, 2023, the
Company is required to maintain a Total Net Leverage Ratio of equal to or less than 4.00 to 1.00, which requirement reduces to 3.25 to 1.00 for the fiscal quarter ending March 31, 2024 and thereafter. The Total Net Leverage Ratio under the
Credit Agreement is defined as the ratio of (a) the aggregate principal amount of Consolidated Debt (as defined in the Credit Agreement) of the Company and its subsidiaries as of the last day of the most recently ended Test Period (as defined
in the Credit Agreement) minus Unrestricted Cash (as defined in the Credit Agreement) and Permitted Investments (as defined in the Credit
Agreement) of the Borrower and its subsidiaries for such Test Period to (b) EBITDA (as defined in the Credit Agreement) for such Test Period. EBITDA for purposes of these restrictive covenants includes incremental adjustments beyond those
included in our EBITDA non-GAAP measure. Specifically, the Credit Agreement EBITDA definition includes the pro forma impact of EBITDA to be received from certain acquisition-related synergies and cost optimization activities, subject to a 20%
cap.
Obligations under the Credit Agreement are secured by a first-priority lien on substantially all of the assets of the Company and
certain of its domestic wholly owned subsidiaries (the “Subsidiary Guarantors”), which Subsidiary Guarantors also guarantee the obligations of the Company under the Credit Agreement, subject to certain exceptions. The Credit Agreement contains
customary affirmative and negative covenants customary for facilities of its type, which, among other things, generally limit (with certain exceptions): mergers, amalgamations, or consolidations; the incurrence of additional indebtedness
(including guarantees); the incurrence of additional liens; the sale, assignment, lease, conveyance or transfer of assets; certain investments; dividends and stock redemptions or repurchases in excess of certain amounts; transactions with
affiliates; engaging in materially different lines of business; payments and modifications of indebtedness or the governing documents of the Company or any Subsidiary Guarantor; and other activities customarily restricted in such agreements.
The Credit Agreement contains customary events of default for facilities of this type. If an event of default under the Credit
Agreement occurs and is continuing, the commitments thereunder may be terminated and the principal amount outstanding thereunder, together with all accrued and unpaid interest and other amounts owed thereunder, may be declared immediately due
and payable.
Supplemental Indenture
As previously disclosed, on March 1, 2021, Adtalem Escrow Corporation (the “Escrow Issuer”), a wholly owned subsidiary of the Company,
entered into an Indenture, dated March 1, 2021 (the “Indenture”), by and between the Escrow Issuer and U.S. Bank National Association, as trustee and notes collateral agent, pursuant to which the Escrow Issuer issued $800.0 million aggregate
principal amount of 5.500% Senior Secured Notes due 2028 (the “Notes”).
Upon issuance of the Notes, the net proceeds of the offering, along with certain additional funds (the “Escrowed Funds”), were deposited
into a segregated escrow account.
In connection with the Acquisition, the Escrowed Funds were released from escrow and were used, along with proceeds from the Term Facility
and cash on hand, to finance the purchase price payable in connection with the Acquisition and to pay related fees and expenses.
In connection with the release of the Escrowed Funds from escrow, the Escrow Issuer merged with and into the Company, with the Company as
the surviving entity in the merger. By entry into a supplemental indenture to the Indenture (the “Supplemental Indenture”), along with the Subsidiary Guarantors, the Company assumed all of the Escrow Issuer’s obligations as the issuer under the
Indenture and the Notes and the Subsidiary Guarantors became guarantors under the Indenture.
Obligations under the Notes are secured by a perfected first-priority lien on substantially all of the assets of the Company and the
Subsidiary Guarantors on a pari passu basis with the obligations under the Credit Facility, pursuant to customary intercreditor arrangements.
The foregoing descriptions of the Credit Agreement and the Supplemental Indenture are qualified in their entirety by reference to the
Indenture, the Supplemental Indenture and the Credit Agreement, copies of which are filed as Exhibits 4.1, 4.2 and 10.1 hereto and the terms of which are incorporated by reference in this Item 2.03.
None of the Agreement, the Credit Agreement and the Supplemental Indenture are intended to be a source of factual, business or operational
information about the Company or its subsidiaries. The representations, warranties and covenants contained in the Agreement, the Credit Agreement and the Supplemental Indenture were made only for purposes of such agreements and as of specific
dates, were solely for the benefit of the parties to such agreements, and may be subject to limitations agreed upon by the parties, including being qualified by disclosures for the purpose of allocating contractual risk between the parties
instead of establishing matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors or security holders. Accordingly, investors should not rely on the
representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties.
On the Closing Date, the Company issued a press release announcing the consummation of the Acquisition. A copy of the press release is
attached hereto as Exhibit 99.1 and is incorporated by reference in this Item 8.01.
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Item 9.01
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Financial Statements and Exhibits.
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(a) Financial
Statements of Businesses Acquired.
The Company will file the financial statements required by Item 9.01(a) of Form 8-K by amendment to this Current Report
on Form 8-K within the requisite filing period.
(b) Pro Forma
Financial Information.
The Company will file the pro forma financial information required by Item 9.01(b) of Form 8-K by amendment to this
Current Report on Form 8-K within the requisite filing period.
(d) Exhibits.
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Cover Page Interactive Data File (embedded within the Inline XBRL document)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
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ADTALEM GLOBAL EDUCATION INC.
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By:
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/s/ Douglas G. Beck
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Douglas G. Beck
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Senior Vice President and General Counsel
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Date: August 12, 2021