UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): July 15, 2011
The Ensign Group,
Inc.
(Exact name of registrant as
specified in its charter)
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| Delaware |
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001-33757 |
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33-0861263 |
| (State or other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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27101 Puerta Real, Suite 450,
Mission Viejo, CA
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92691 |
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(Zip Code) |
Registrant’s telephone number,
including area code: (949) 487-9500
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Not
Applicable
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| (Former name or former address if changed since last report.) |
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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| Item 1.01 |
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Entry Into a Material Definitive Agreement. |
On July 15, 2011, The Ensign Group, Inc. (the “Company”) entered into a Revolving Credit and
Term Loan Agreement, dated as of July 15, 2011, among the Company and the several banks and other
financial institutions and lenders from time to time party thereto (the “Lenders”) and SunTrust
Bank, in its capacity as administrative agent for the Lenders, as issuing bank and as swingline
lender (the “Credit Agreement”). The Credit Agreement consists of a $75 million term loan, all of
which was outstanding on July 15, 2011, and a $75 million revolving loan, which is undrawn as of
the date hereof. Approximately $40,000,000 of the term loan was deployed to refinance an existing
mortgage that was previously secured by six of Ensign’s 58 owned facilities. Amounts borrowed
pursuant to the Credit Agreement are guaranteed by certain of the Company’s wholly-owned
subsidiaries and secured by substantially all of the Company’s personal property.
Under the Credit Agreement, the Company must maintain compliance with specified financial
covenants measured on a quarterly basis, including a maximum leverage ratio ranging from
3.25:1 to 3.5:1, an interest/rent coverage ratio of not less than 2.5:1and an asset coverage ratio
of 1.25:1 (each as set forth in further detail in the Credit Agreement). The Credit Agreement also
includes certain additional affirmative and negative covenants, including limitations on the
incurrence of additional indebtedness, liens, investments in other businesses and capital
expenditures.
Loans outstanding under the Credit Agreement bear interest, at the Company’s election, either
a base rate (as defined in the Credit Agreement) plus an initial margin of 1.50% or the London
Interbank Offered Rate (“LIBOR”) plus an initial margin of 2.50%. Under the terms of the Credit
Agreement, the applicable margin adjusts based on the Company’s leverage ratio as set forth in
further detail in the Credit Agreement. In addition, the Company has a commitment fee on the unused
portion of the revolving line of credit that ranges from 0.30% to 0.50% based on the Company’s
leverage ratio for the applicable four-quarter period.
The term loan requires principal payments of 1.25% of the original principal amount issued on
the last business day of each of September, December, March and June, commencing on September 30,
2011, with the balance due July 15, 2016. Amounts borrowed under the term loan may be prepaid at
any time without penalty except for breakage costs. Commitments under the revolving loan terminate
on July 15, 2016. The Company is required to prepay the loans from net cash proceeds from the sale
or disposition of assets, insurance and condemnation proceeds and other extraordinary payments
subject to certain baskets and reinvestment allowances (each as set forth in the Credit Agreement).
The Company and its subsidiaries maintain the right to borrow against their real estate assets
up to the greater of $100 million and the Company’s Consolidated EBITDA for the most recently ended
four consecutive quarters provided that the Company is in compliance with the Credit Agreement and
that the additional debt would not cause any covenant violation of the Credit Agreement.
Furthermore, the Company has the right to increase its borrowings under the term loan and/or the
revolving loan by an additional $100 million provided that the Company is in compliance with the
Credit Agreement, that the additional debt would not cause any covenant violation of the Credit
Agreement, and that existing or new lenders within the Credit Agreement agree to increase their
commitments.
The foregoing description does not purport to be complete and is qualified in its entirety by
reference to the full text of the Revolving Credit and Term Loan Agreement, which is filed together
as Exhibit 10.1 to this Current Report and 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. |
The information contained in Item 1.01 of this Current Report is incorporated herein by
reference.
On July 18, 2011, the Company issued a press release regarding the securing of the
loan described in Item 1.01 above. A copy of the press release is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
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| Item 9.01. |
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Financial Statements and Exhibits. |
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| Exhibit |
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| No. |
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Description |
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10.1
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Revolving Credit and Term Loan Agreement, dated as of July 15,
2011, among The Ensign Group, Inc. and the several banks and
other financial institutions and lenders from time to time
party thereto (the “Lenders”) and SunTrust Bank, in its
capacity as administrative agent for the Lenders, as issuing
bank and as swingline lender. |
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99.1
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Press Release of the Company |