However, this is being seen less and less often, particularly in the high-yield space. Leverage Ratios Notwithstanding anything to the contrary contained herein, for purposes of calculating any leverage ratio herein in connection with the incurrence of any Indebtedness, (a) there shall be no netting of the cash proceeds proposed to be received in connection with the incurrence of such Indebtedness and (b) to the extent the Indebtedness to be incurred is revolving Indebtedness, such incurred revolving Indebtedness (or if applicable, the portion (and only such portion) of the increased commitments thereunder) shall be treated as fully drawn. This allows lenders to reassess the new owners credit quality, evaluate any changes in operating or management structures, and adjust covenant levels, provisions, and interest rates to the now-prevailing market. Subscribe to get thought leadership from Configure Partners direct to your inbox. In addition to the NIA acquisition, Evolent and Centene are expanding Centene's relationship with NIA and extending NIA's contracts with Centene through 2027. Center, http://ir.evolenthealth.com/event-calendar/default.aspx, https://www.prnewswire.com/news-releases/evolent-health-announces-acquisition-of-specialty-asset-nia-and-strategic-partnership-with-centene-301682153.html, Accelerates Evolent Health's Value-Based Specialty Care Market Leadership, Transaction Anticipated to be Immediately Accretive to Adjusted EBITDA Margins and Cash Flow, Highly Complementary Business Expected to Add $85 Million of High-Visibility Adjusted EBITDA by 2024; Maintains Strong Balance Sheet, Diversifies Evolent's Revenue Base and Increases Cross-Sell Opportunity from $16 Billion to $50 Billion, Expands Centene Customer Relationship with New NIA Contract Expansions and is Expected to Accelerate Pace of Remaining Evolent Cross-Sell Opportunity with Centene. The company may also be required to maintain certain business activities or to refrain from any activities or investments that are outside of its core business operations. These types of financial ratios shouldn't be used alone but alongside other metrics to . Although forward-looking statements contained in this presentation are based upon what the Company believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. This website should not be construed as investment advice or an offer or solicitation any investment advisory service.This website is meant to be for information purposes solely for portfolio companies and prospective portfolio companies. For security purposes, and to ensure that the public service remains available to users, this government computer system employs programs to monitor network traffic to identify unauthorized attempts to upload or change information or to otherwise cause damage, including attempts to deny service to users. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. A leverage ratio is any one of several financial measurements that assesses the ability of a company to meet its financial obligations. The portion of a First Lien Loan with a Senior Net Leverage Ratio of up to 5.00x shall be assigned the First Lien Loan Advance Rate (as applicable pursuant to the above chart) and the portion above 5.00x shall be assigned an Advance Rate of 45%. We believe this announcement aligns with our core operating priorities of revenue growth, margin expansion and disciplined capital allocation, all for the benefit of our shareholders. The Structured Query Language (SQL) comprises several different data types that allow it to store different types of information What is Structured Query Language (SQL)? The gross leverage ratio is the sum of an insurance company's net premiums written ratio, net liability ratio, and ceded reinsurance ratio. Portability is often based on a leverage test, most commonly Net Leverage. The Company expects to fund $400 million of the purchase price in cash through a combination of cash on the balance sheet and a fully committed financing package from funds managed by Ares Management. Furthermore, to maintain a healthy financial system, financial regulators implement standards and requirements that encourage banks to take less risk and focus more on offering senior financial products. Net Leverage Ratio represents the First Lien Leverage Ratio (as defined in the Credit Facility), and means the ratio of amounts outstanding under the First Lien Term Loan and First Lien Revolver plus other outstanding debt obligations secured by a lien on the assets of Focus LLC (excluding letters of credit other than unpaid drawings thereunder) minus unrestricted cash and cash equivalents to Consolidated EBITDA (as defined in the Credit Facility). Debt covenants restrict borrowers from, actions that can result in a significant adverse impact or increased risk for. Consolidated First Lien Net Leverage Ratio, Consolidated Senior Secured Net Leverage Ratio, Consolidated Senior Secured Leverage Ratio, Cash Equivalents and Marketable Securities, Indebtedness of the Borrower and the Restricted Subsidiaries. Note that this policy may change as the SEC manages SEC.gov to ensure that the website performs efficiently and remains available to all users. You can also sign up for email updates on the SEC open data program, including best practices that make it more efficient to download data, and SEC.gov enhancements that may impact scripted downloading processes. They are provided by the commercial or corporate banking departments of a bank. Maximum Senior Leverage Ratio The Company shall not permit the ratio (the "Senior Leverage Ratio") of (i) the sum of the aggregate outstanding principal amount of all Term Loans and Revolving Credit Obligations to (ii) EBITDAE to be greater than: Cash Flow Leverage Ratio The Borrower will not permit the ratio (the Cash Flow Leverage Ratio), determined as of the end of each of its fiscal quarters (commencing with the fiscal quarter ending September 30, 2012), of (i) Consolidated Funded Indebtedness to (ii) Consolidated EBITDA for the then most-recently ended four fiscal quarters to be greater than 2.00:1.00 for each fiscal four-quarter period. They can be financial or non-financial in nature, but for the purposes of this article, we will address financial covenants in a separate section below. Non-GAAP Measures To supplement our condensed consolidated financial statements presented on a GAAP basis, RBI reports the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, LTM Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings per Share (Adjusted Diluted EPS), Organic revenue growth, Organic Adjusted EBITDA growth, Free Cash Flow, LTM Free Cash Flow and Net Leverage. Maximum Leverage Ratio The Borrower will not permit the ratio (the Leverage Ratio), determined as of the end of each of its fiscal quarters ending on and after January 31, 2011, of (i) Consolidated Total Funded Indebtedness to (ii) Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending with the end of such fiscal quarter, all calculated for the Borrower and its Subsidiaries on a consolidated basis based on the quarterly compliance certificate most recently delivered pursuant to Section 5.01(c), to be greater than 3.00 to 1.00. These banks generally have a low cost of funding and a profitable spread between this cost and the interest rate they charge to their borrowers. Additional filters are available in search. The definition may allow sufficient flexibility to manipulate the calculation figure to trigger portability. A lender enters into a debt agreement with a company. Our net covenant leverage, as calculated under the 2020 Amended Senior Credit Facility, differs from our net total leverage as it excludes (i) any vendor financing-related short-term liabilities, (ii) any liabilities related to the mobile spectrum licenses, yet includes (iii) the Credit Facility Excluded Amount (which is the greater of 400.0 . Testimonials reflected on this site may not be representative of the experience of other customers and the testimonial is not a guarantee of future performance or success. Additional filters are available in search, Total Net Leverage Ratio The Loan Parties shall not suffer or permit the Total Net Leverage Ratio as of any date set forth below to be greater than the maximum ratio set forth in the table below opposite such date: Computation Period Ending: Maximum Total Net Leverage Ratio: March 31, 2019 9.00:1.00 June 30, 2019 7.50:1.00 September 30, 2019 6.00:1.00 December 31, 2019 5.00:1.00 March 31, 2020 5.75:1.00 June 30, 2020 5.75:1.00 September 30, 2020 5.75:1.00 December 31, 2020 5.75:1.00 March 31, 2021 5.25:1.00 June 30, 2021 5.25:1.00 September 30, 2021 and the last day of each fiscal quarter ending thereafter 3.50:1.00, Senior Leverage Ratio The Senior Leverage Ratio during any period set forth below shall not exceed the ratio set forth below opposite such period: SENIOR PERIOD LEVERAGE RATIO ------ -------------- March 31, 2002-December 30, 2002 5.25:1.00 December 31, 2002-December 30, 2003 3.25:1.00 December 31, 2003 and thereafter 2.50:1.00. To keep learning and advancing your career, the following resources will be helpful: Learn accounting fundamentals and how to read financial statements with CFIs free online accounting classes. Any transactions listed on this Site are included as representative transactions and are not necessarily reflective of overall performance. Our solutions encompass total cost of care management, specialty care management, and administrative simplification. Restrict a companys day-to-day business operations, Strike the right balance that allows a lender to be assured of steady performance, and enables a management team to focus on business execution, Assist the company in building and maintaining a responsible financial structure, to more easily navigate new capital needs ahead, Establish an early indicator that communicates financial challenges before a more serious issue emerges. This press release is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any securities of any nature whatsoever, and it may not be relied upon in connection with the purchase of securities. Stand out and gain a competitive edge as a commercial banker, loan officer or credit analyst with advanced knowledge, real-world analysis skills, and career confidence. Our website requires features that may not be fully supported by your current browser. In this scenario, Lender A will set a dividend restriction. The acquisition finance landscape post-COVID has been marked by intense competition perhaps more intense than pre-COVID. Discover your next role with the interactive map. We are excited to introduce ourselves to you and our unique way of working together. They show how much of an organization's capital comes from debt a solid indication of whether a business can make good on its financial obligations. Below is a list of the top 10 most common metrics lenders use as debt covenants for borrowers: Debt covenants are defined as positive covenants or negative covenants. J.P. Morgan Securities LLC is serving as financial advisor to Centene, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as its legal counsel. Therefore, there will be a higher possibility of the company defaulting on its loan repayment to Lender A. Expertise, analysis, and experience drive everything we do, https://www.prudentialprivatecapital.com/posts/senior-debt-covenants-what-to-expect, https://www.pricoaprivatecapital.com/posts/senior-debt-covenants-what-to-expect. Common affirmative covenants include the following: Negative covenants generally limit or prohibit the borrower from doing something that would or could be detrimental to the lender. The Credit Parties will not permit the Senior Net Leverage Ratio of the Credit Parties and their Subsidiaries to be greater than 4.25 to 1.00 as of the last day of any Testing Period. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors. The Tier 1 leverage ratio is calculated by dividing Tier 1 . High yield bond investors include mutual funds, pension funds, insurance companies and arrangers of . Senior Net Leverage Ratio. The contents of this press release do not constitute legal, tax or business advice. The term 'leverage ratio' refers to a set of ratios that highlight a business's financial leverage in terms of its assets, liabilities, and equity. Using Senior Debt Capital for Strategic Growth, The Benefits of Long-Term vs. Short-Term Financing, Questions about how we can help you move your business forward? This may allow the new owner to layer in unsecured debt to complete the transaction but keep senior secured debt in place. Please try an other one. Further, with highly visible free cash flow generation in 2023 and beyond, the transaction maintains our strong balance sheet from day one, while enabling us to quickly de-lever in the next 18 months. Based on the risk profile of the company, the lender lends at an annual interest rate of 7%. On more aggressive deals, the buyer list may allow strategic or non-sponsor buyers. A leverage ratio is used to evaluate a company's debt load in relation to its equity and assets. As it is borrowed money, each layer of debt has a corresponding interest rate payment schedule, where the company will make regular principal and interest payments. Goldman Sachs is serving as financial advisor to Evolent, and Bass Berry & Sims PLC and King & Spalding LLP are serving as its legal counsel. Senior Net Leverage Ratio means, as of the last day of any fiscal quarter of Loan Parties, the ratio of (i) (a) Senior Debt as of the last day of any fiscal quarter of Loan Parties minus (b) the total cash on deposit in the Borrowers ' Deposit Accounts (other than Restricted Accounts) as of the last day of such fiscal quarter to (ii) Loan Partie. Typically lenders will want the portability provision to be limited to a single use, in contrast to high-yield bonds, which can often be used more than once. In the following days, the company declares a liquidating dividend to all shareholders. The transaction is subject to U.S. federal antitrust clearance and satisfaction of other customary closing conditions and is expected to close in the first half of 2023. subordinate to senior secured loan debt but senior to the private equity fund's equity investment, in a private equity-backed capital structure. Debt covenants are not used to place a burden on the borrower. Consolidated Net Leverage Ratio Permit the Consolidated Net Leverage Ratio as of the end of any fiscal quarter of the Borrower to be greater than 4.50:1.00. In both instances, a portable capital structure would be a significant benefit capture the borrower-friendly terms of todays market and set up for an exit in two to three years. To ensure our website performs well for all users, the SEC monitors the frequency of requests for SEC.gov content to ensure automated searches do not impact the ability of others to access SEC.gov content. The company cannot pay annual cash dividends exceeding 60% of net earnings. Evolent Health (NYSE:EVH) delivers proven clinical and administrative solutions that improve whole-person health while making health care simpler and more affordable. For more information, please see the SECs Web Site Privacy and Security Policy. Affirmative covenants are standards that the borrower agrees to maintain throughout the term of the loan. Current guidelines limit users to a total of no more than 10 requests per second, regardless of the number of machines used to submit requests. Net Leverage is a performance measure that we believe provides investors a more complete understanding of our leverage position and borrowing capacity after factoring in cash and cash equivalents that eventually could be used to repay outstanding debt. Both lenders and sponsors pay close attention to add-backs, proforma adjustments, and synergies allowed in the calculation of EBITDA. In tandem with the announcement of the planned acquisition of NIA as well as the anticipated growth in Evolent's partnership with Centene, the Company is providing an initial view on its growth prospects for 2023. All Rights Reserved. 2020 Configure Partners, LLC. Configure Partners Welcomes New Associate, Christian Terrill, 1H 2023 Retail Industry Update: 2022 Results Inform 2023 Trends, Configure Partners Advises Hidden Harbor on its Acquisition Financing for Dayco LLC, Configure Partners Deep Transaction Expertise in Restructuring / Distressed M&A, Configure Partners Advises Stellex Capital Management on its Recapitalization of A. Stucki Company. WASHINGTON, Nov. 17, 2022 /PRNewswire/ --Evolent Health, Inc. ("Evolent" or "the Company") (NYSE: EVH) today announced that it has entered into a definitive agreement to acquire NIA (also known as Magellan Specialty Health), the specialty benefit management organization owned by Centene Corporation (NYSE: CNC) that focuses on managing cost and quality in the areas of radiology, musculoskeletal, physical medicine, and genetics. Given the delicate balance between lenders concerns and benefits to private equity sponsors, there are several points of contention we expect to be front-and-center if portability migrates into the core middle market in a real way. The net debt-to- EBITDA (earnings before interest depreciation and amortization) ratio is a measurement of leverage, calculated as a company's. Thank you for your interest in the U.S. Securities and Exchange Commission. Most comprehensive library of legal defined terms on your mobile device, All contents of the lawinsider.com excluding publicly sourced documents are Copyright 2013-, Agreement, Notes, and other Loan Documents. Additional filters are available in search. Typical negative covenants strive to limit or prohibit the following activities: Financial covenants measure the financial position of the company against its debt obligations (although tested most frequently on a quarterly basis, it is common for borrowers to maintain compliance with these covenants at all times). It was initially introduced in the high-yield bond market to protect exiting and incoming owners from paying out expensive call protection on existing bonds, but portability has gradually migrated into leveraged loans as well. Moreover, to try to avoid potential insolvency by the borrower, senior debtholders may prevent the company from issuing junior debts. Centene offers affordable and high-quality products to nearly 1 in 15 individuals across the nation, including Medicaid and Medicare members (including Medicare Prescription Drug Plans) as well as individuals and families served by the Health Insurance Marketplace, the TRICARE program and individuals in correctional facilities. For example, the borrowing company may be required to maintain a designated credit profile. Portability, however, is less likely to benefit sponsors at the time of an initial investment because the typical hold period approximates the typical capital structure maturity date as well both are around five years. Centene uses its investor relations website to publish important information about Centene, including information that may be deemed material to investors. Nov 17 ,2022 Accelerates Evolent Health's Value-Based Specialty Care Market Leadership Transaction Anticipated to be Immediately Accretive to Adjusted EBITDA Margins and Cash Flow Highly Complementary Business Expected to Add $85 Million of High-Visibility Adjusted EBITDA by 2024; Maintains Strong Balance Sheet Enroll now for FREE to start advancing your career! In order to protect against any deterioration in the credit risk profile, lenders have historically required that the company delever between a half to a full turn of EBITDA before the portability provision is made available. Investors use leverage ratios to understand how a company plans to meet its financial obligations and to determine how its debt is used to finance operations. Sponsors can essentially wait until earnings are at a peak to trigger portability. Consideration for the acquisition includes $650 million at close plus additional contingent consideration of up to $150 million based on 2023 performance. Instead, the debtholders have a general claim against the companys assets. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this press release. Tier 1 Leverage Ratio: The Tier 1 leverage ratio is the relationship between a banking organization's core capital and its total assets. Therefore, the lender would be out of his or her money if the company were to liquidate the company and pay out a liquidating dividend. Leverage Ratio: The leverage ratio is defined as total net debt (defined as the sum of note payable and long-term debt less cash and cash equivalents) divided by Adjusted EBITDA. If it develops, the trend-setters are likely to be strong borrowers who were only moderately impacted by COVID-19 who are also backed by sponsors with established reputations amongst lenders. That said, it is too early to call it a trend, and time will tell how common these provisions become. Forward-looking information is based on information currently available to the Company and involves a number of known and unknown assumptions, risks, uncertainties, and other factors, which may be difficult to predict and beyond the control of the company. However, there are certain things to be aware of: Covenants differ based on the business, whether the financing at hand is secured or unsecured, and cash-flow based or asset-based. These statements, including but not limited to estimates of Adjusted EBITDA, earnings growth, expected cost synergies and net leverage ratios, are only predictions based on our current expectations and projections about future events. Attractive total valuation, including payment of the full earn out, of 9.4-times the run-rate Adjusted EBITDA. Permit the Senior Secured Net Leverage Ratio as of the last day of the four consecutive fiscal quarter period of the Designated Company then last ended (in each case taken as one accounting period), beginning with the four fiscal quarter period ending September 30, 2016, . The Company plans to prioritize debt paydown in future capital allocation, targeting a senior net leverage ratio of under 1.2-times and total net leverage ratio of under 2.0-times in 2024. Discover your next role with the interactive map. Leverage Ratio The Leverage Ratio, as of the last day of each fiscal quarter of the Borrower, shall be less than or equal to 2.25 to 1.0. Maintain Priority of Obligation - A primary goal of senior lenders is to maintain their status as senior lenders and rank 'pari passu,' or on an equal level, with other senior lenders. Additional filters are available in search. Unlike senior debt, when banks take on some junior debt of a company, they will charge higher interest rates to compensate for the risk of having a subordinate status. To participate, please dial855-940-9467or412-317-6034for international callers and referencing the "Evolent Health call" 15 minutes prior to the call (Confirmation number 10173552). Without the restriction, the company can pay out all of its earnings or liquidate its assets and pay a liquidating dividend to all shareholders. A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: "believe," "anticipate," "expect," "estimate," "aim," "predict," "potential," "continue," "plan," "project," "will," "should," "shall," "may," "might" and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. The debt agreement could specify the following debt covenants: When a debt covenant is violated, depending on the severity, the lender can do several things: CFI is a global provider of financial modeling coursesand also offers financial analyst certification training. Lenders are historically accustomed to enjoying the protection of a change of control provision. To satisfy senior lenders and qualify for the cheapest capital, companies will often agree to maintain certain financial ratios that serve as indicators of liquidity, profitability and capital adequacy. 1001 and 1030). The information on this Site is for informational purposes only. Something went wrong while submitting the form. Nothing on this Site constitutes investment, legal or tax advice and we do not advise on the tax consequences of any investment. The short answer is: only because they have to, in order to win the deal. List of Excel Shortcuts Evolent serves a national base of leading payers and providers, is the first company to receive the National Committee for Quality Assurance's Population Health Program Accreditation and is consistently recognized as a top place to work in health care nationally. The RCF requires the Italian co-issuer to comply with a springing super senior net leverage ratio covenant, being a ratio of super senior indebtedness to consolidated EBITDA of 3:1. Lender A lends $1 million to a company. Excel shortcuts[citation CFIs free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and What are SQL Data Types? Unsecured debt is different in that it does not have a pledged asset as collateral. As it applies to portability, this term provides significant flexibility to choose when to enter into an agreement. To protect against this, lenders often reset the builder basket to zero in the restricted payments covenant and designate capital injected as Excluded Amounts to carve out new funds introduced by the new owner. Restrictions put on debt agreements by the lender to limit the borrower's actions. This article illustrates what companies can expect with senior debt covenants, and ultimately, how covenants can be used to help both the lender and the borrower. A live link to the webcast of the call as well a presentation to accompany the call are available at the following location: http://ir.evolenthealth.com/event-calendar/default.aspx. Equinox shall at all times maintain the Net Senior Leverage Ratio at less than or equal to 2.50: 1.00 and shall calculate the Net Senior Leverage Ratio as at the last day of each Fiscal Quarter. Seth Blackley, Chief Executive Officer of Evolent, stated, "Today's announcement represents another step forward in Evolent's journey to become a national leader in value-based specialty care, and we believe it will also improve our financial profile, customer diversification and scale. Certain statements made in this press release and in other written or oral statements made by us or on our behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Get Certified for Commercial Banking (CBCA). The impetus is to ensure that the new owners credit profile is similar to the current owner. CFI offers the Commercial Banking & Credit Analyst (CBCA)certification program for those looking to take their careers to the next level. Portability is not common in the US middle market, but current market conditions are certainly supportive of an increased prevalence. Evolent anticipates 2023 reported revenue growth to exceed 25% before any impact from NIA, equating to organic growth of 20%+ and the contribution of seven months of incremental revenue from the IPG acquisition, completed in August. Instead, sponsors are opting to return capital through a dividend recap or, if that is not achievable, extend the maturity of their portfolio companies to allow for a later exit. Offers can only be made where lawful under, and in compliance with, applicable law. What Is the Net Debt-to-EBITDA Ratio? NIA has revenues of approximately $250 million and stand-alone Adjusted EBITDA of approximately $50 million. While portability has been around for the last ten years or so, the concept has only recently gained traction in the US loan market. Centene Corporation, a Fortune 500 company, is a leading health care enterprise that is committed to helping people live healthier lives. . The additional equity injection may build restricted payments capacity, which can subsequently be pulled out once the transaction closes. Broad opportunities to further expand the Centene partnership. These ratios provide an indication of how the company's assets and business operations are financed (using debt or equity). We want to provide the best possible experience for our users. The risks included here are not exhaustive. ", John Johnson, Chief Financial Officer of Evolent, stated, "We believe the NIA acquisition is financially attractive and is expected to immediately enhance our Adjusted EBITDA margin and cash flow profile. There have been instances where same-day debt exclusion language has allowed the company to exclude debt incurred on the day that ratio calculations are completed, including the calculation of the portability ratio. Note: We do not offer technical support for developing or debugging scripted downloading processes. Below we have highlighted a few covenants (both affirmative and negative) that borrowers can expect to see. Rather than offer unrestricted portability, lenders may pre-approve a list of permitted acquiring entities or define minimum characteristics the new owner must meet, such as minimum capital or AUM. Evolent Health, Inc. Senior Secured Net Leverage Ratio means, with respect to any Test Period, the ratio of (a) Consolidated Senior Secured Net Debt as of the last day of such Test Period to (b) Consolidated EBITDA of the Parent Borrower for such Test Period. Decisions based on information contained on the Site are the sole responsibility of the visitor. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Covenants may feel onerous at times, heres how they can help your company. Cause Loan Parties on a Consolidated Basis to maintain as of the end of the fiscal quarter ending September 30, 2021 and as of the end of each fiscal quarter ending thereafter, a Senior Net Leverage Ratio tested as of such date of not greater than 2.50 to 1.00. We reserve the right to block IP addresses that submit excessive requests. In particular, these include statements relating to our guidance and business outlook and future performance, leverage or financial results, including of NIA, and our strategy. Debt covenants are agreements between the borrower and lender that can be rather restrictive. NIA standalone financials for 2023 are expected to be: Annual adjusted net revenue growth for NIA is expected to meet or exceed Evolent's long-term growth target. However, they are in place to help frame a conversation between the lender and borrower, and potentially provide an early indication that changes need to be made either within the company or credit agreement, supporting the long-term success of both the lender and borrower. Risks and uncertainties that may cause actual results to vary materially, some of which are described within the forward-looking statements, include, among others: risks and uncertainties related to the possibility that the closing of the NIA transaction may be delayed or may not occur, and the risk that litigation or other matters could affect the closing, the significant portion of revenue we derive from our largest partners, and the potential loss, non-renewal, termination or renegotiation of our relationship or contract with any significant partner, or multiple partners in the aggregate; evolution in the market for value-based care; uncertainty in the health care regulatory framework, including the potential impact of policy changes; our ability to offer new and innovative products and services; risks related to completed and future acquisitions, investments, alliances and joint ventures, divert management resources, or result in unanticipated costs or dilute our stockholders; the financial benefits we expect to receive as a result of the sale of certain assets of Passport may not be realized; the growth and success of our partners, which is difficult to predict and is subject to factors outside of our control, including governmental funding reductions and other policy changes, enrollment numbers for our partners' plans, premium pricing reductions, selection bias in at-risk membership and the ability to control and, if necessary, reduce health care costs; risks relating to our ability to maintain profitability for our total cost of care and New Century Health's performance-based contracts and products, including capitation and risk-bearing contracts; our ability to effectively manage our growth and maintain an efficient cost structure, and to successfully implement cost cutting measures; changes in general economic conditions nationally and regionally in our markets, including inflation and economic and business conditions and the impact thereof on the economy resulting from the COVID-19 pandemic and other public health emergencies our ability to recover the significant upfront costs in our partner relationships; our ability to attract new partners and successfully capture new growth opportunities; the increasing number of risk-sharing arrangements we enter into with our partners; our ability to estimate the size of our target markets; our ability to maintain and enhance our reputation and brand recognition; consolidation in the health care industry; competition which could limit our ability to maintain or expand market share within our industry; risks related to governmental payer audits and actions, including whistleblower claims; our ability to partner with providers due to exclusivity provisions in our contracts; risks related to our offshore operations; our ability to contain health care costs, implement increases in premium rates on a timely basis, maintain adequate reserves for policy benefits or maintain cost effective provider agreements; our dependency on our key personnel, and our ability to attract, hire, integrate and retain key personnel; the impact of additional goodwill and intangible asset impairments on our results of operations; our indebtedness, our ability to service our indebtedness, and our ability to obtain additional financing; our ability to achieve profitability in the future; the impact of litigation, including the ongoing class action lawsuit; material weaknesses in the future may impact our ability to conclude that our internal control over financial reporting is not effective and we may be unable to produce timely and accurate financial statements; restrictions and penalties as a result of privacy and data protection laws; data loss or corruption due to failures or errors in our systems and service disruptions at our data centers; restrictions and penalties as a result of privacy and data protection laws; adequate protection of our intellectual property, including trademarks; any alleged infringement, misappropriation or violation of third-party proprietary rights; our use of "open source" software; our ability to protect the confidentiality of our trade secrets, know-how and other proprietary information; our reliance on third parties and licensed technologies; our ability to use, disclose, de-identify or license data and to integrate third-party technologies; our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our partners; our reliance on third-party vendors to host and maintain our technology platform; our obligations to make payments to certain of our pre-IPO investors for certain tax benefits we may claim in the future; our ability to utilize benefits under the tax receivables agreement described herein; our obligations to make payments under the tax receivables agreement that may be accelerated or may exceed the tax benefits we realize; the terms of agreements between us and certain of our pre-IPO investors; the conditional conversion features of the 2024 and 2025 convertible notes, which, if triggered, could require us to settle the 2024 or 2025 convertible notes in cash; the potential volatility of our Class A common stock price; the potential decline of our Class A common stock price if a substantial number of shares are sold or become available for sale; provisions in our second amended and restated certificate of incorporation and third amended and restated by-laws and provisions of Delaware law that discourage or prevent strategic transactions, including a takeover of us; the ability of certain of our investors to compete with us without restrictions; provisions in our second amended and restated certificate of incorporation which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees; and our intention not to pay cash dividends on our Class A common stock. Consolidated Senior Leverage Ratio Permit the Consolidated Senior Leverage Ratio as of the end of any fiscal quarter of the Borrower to be greater than 3.0 to 1.0. In order to provide you with the optimal experience, how would you describe yourself? The Company plans to prioritize debt paydown in future capital allocation, targeting a senior net leverage ratio of under 1.2-times and total net leverage ratio of under 2.0-times in 2024. Once a company has achieved the type of scale that allows for leverage, it will typically have to commit to certain covenants, whether working with a bank or institutional investor. Upon close, the NIA team and platform will be fully integrated into Evolent's value-based specialty care business, which includes New Century Health, Vital Decisions and IPG. To allow for equitable access to all users, SEC reserves the right to limit requests originating from undeclared automated tools. For more information, contact opendata@sec.gov. If the company goes bankrupt, unsecured senior debtholders are first in line to get paid off from the assets of the company, excluding any pledged assets for secured senior debtholders. In more aggressive deals, the leverage ratio may be based on Senior Secured Leverage rather than Total Net Leverage. No material on this Site shall be used or considered as an offer to sell or a solicitation of any offer to buy the securities or services of Configure Partners, LLC (Configure, we or us) or any other issuer. In this scenario, Lender A would set a debt restriction. Many of these sponsors have deferred portfolio company exits of businesses that were slated to be sold in 2020 or 2021, as the valuations are likely to be negatively impacted by COVID-19. Reference ID: 0.40284317.1685776324.29d88e5. Structured Query Language (known as SQL) is a programming language used to interact with a database. Excel Fundamentals - Formulas for Finance, Certified Banking & Credit Analyst (CBCA), Business Intelligence & Data Analyst (BIDA), Commercial Real Estate Finance Specialization, Environmental, Social & Governance Specialization, Cryptocurrency & Digital Assets Specialization (CDA), Business Intelligence Analyst Specialization, Financial Planning & Wealth Management Professional (FPWM). The company cannot borrow debt that is senior to this debt. They are also called banking covenants or financial covenants. Many involve the relationship between Earning Before Interest, Taxes, Depreciation and Amortization (EBITDA) as well as debt levels. Net debt leverage ratio is a key financial measure that is used by management to assess the borrowing capacity of the Company. Debt covenant implications for the lender and the borrower include the following: Debt restrictions protect the lender by prohibiting certain actions by the borrowers. These ratios assist a lender in understanding the operating health of a borrower and provide an early indication if changes in performance merit a deeper review. If so, this is stated in senior debt covenants that are designed to provide extra protection against a loss for the lender. If the borrower does not abide by the covenant, then the lender has the right to either rescind the loan and demand immediate repayment of accrued interest and principal, or to make changes to the loan agreement, such as increasing the interest rate charged for the loan. The net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio measures financial leverage and a company's ability to pay off its debt. Start now! Any remaining assets, after senior debtholders have been paid, will then go to the subordinated debtholders. It is more secure than any other debt, such as subordinated debt (also known as junior debt), because senior debt is usually collateralized by assets. Moreover, we operate in a rapidly changing and competitive environment. that leverage ratios (Net Debt / EBITDA) have increased substantially in recent . New extensions to existing NIA contracts signed in connection with the transaction driving $20 million of expected incremental 2024 Adjusted EBITDA. The upfront consideration will be funded in part by $250 million in Evolent equity issued to the sellers at a price of $29.50, a 24% premium to the prior day's closing price, subject to lock-up provisions. Note that in the scenarios below, it is in the best interest of both parties to set debt covenants. Oops! of Pro Forma Senior Debt Net Leverage Ratio as of July 31, 2021 Non-GAAP Financial Measures To provide investors with additional information regarding the Company in addition to that as determined by generally accepted accounting principles in the United States ("GAAP"), Shareholders and interested participants may also listen to a live broadcast of a conference call hosted by management. Structured Query Language (known as SQL) is a programming language used to interact with a database. Excel Fundamentals - Formulas for Finance, Certified Banking & Credit Analyst (CBCA), Business Intelligence & Data Analyst (BIDA), Commercial Real Estate Finance Specialization, Environmental, Social & Governance Specialization, Cryptocurrency & Digital Assets Specialization (CDA), Business Intelligence Analyst Specialization, Interest Coverage (EBITDA or EBIT / Interest), Fixed Charge Coverage (EBITDA / (Total Debt Service + Capital Expenditures + Taxes), Financial Planning & Wealth Management Professional (FPWM), Achieve a certain threshold in certain financial ratios, Ensure facilities and factories are in good working condition, Perform regular maintenance of capital assets, Provide yearly audited financial statements, Ensure accounting practices are in accordance with GAAP, Pay cash dividends over a certain amount or predetermined threshold, Issue debt more senior than the current debt, Enter into certain types of agreements or leases, The company must maintain an interest coverage ratio of 3.70 based on cash flow from operations, The company cannot pay annual cash dividends exceeding 60% of net earnings, The company cannot borrow debt that is senior to this debt, Demand full immediate repayment of the loan. In other words, debt covenants are agreements between a company and its lenders that the company will operate within certain rules set by the lenders. In more aggressive deals, the leverage ratio may be based on Senior Secured Leverage rather than Total Net Leverage. Sample 1 Senior Net Leverage Ratio As negotiating leverage has tipped in favor of private equity sponsors, more lenders are giving up their rights to have loans automatically repaid if the borrower is acquired. Net Senior Leverage Ratio means with respect to a Debt Security or a Senior Bank Loan Investment either (a) the "Net Senior Leverage Ratio" or comparable definition set forth in the underlying Investment Documents for such Debt Security or Senior Bank Loan Investment, or (b) in the case of any Debt Security or Senior Bank Loan Investment with re. As representative transactions and are not necessarily reflective of overall performance following days, the lender at. 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