2U, INC. Item 1.01. Entry into a Material Definitive Agreement.
Amendment and Extension to Term Loan Credit and Guaranty Agreement
The Company has been in discussions with the term loan lenders concerning
amending and extending the term loans under the Credit Agreement (the
"Transaction Discussions"). As a result of the Transaction Discussions, the
Company and the lenders have agreed on the terms set forth in that certain
Extension Amendment, Second Amendment and First Incremental Agreement to Credit
and Guaranty Agreement to be entered into on
Pursuant to the Second Amendment, the lenders thereunder have agreed to, among
other amendments, extend the maturity date of the term loans thereunder from
Loans under the Credit Agreement will bear interest at a per annum rate equal to (i) with respect to term loans, a base rate or the Term SOFR rate, as applicable, plus a margin of 5.50% in the case of the base rate loans and 6.50% in the case of Term SOFR loans and (ii) with respect to revolving loans, a base rate or the Term SOFR rate, as applicable, plus a margin of 4.50% in the case of the base rate loans and 5.50% in the case of Term SOFR loans. If the term loans under the Credit Agreement are prepaid or amended prior to the six month anniversary of the Second Amendment in connection with a Repricing Event (as defined in the Credit Agreement), the Company shall pay a prepayment premium of 1.0% of the amount of the loans so prepaid.
The obligations under the Credit Agreement are guaranteed by certain of the Company's subsidiaries (the Company and the Guarantors, collectively, the "Credit Parties"). The obligations under the Credit Agreement are secured, subject to customary permitted liens and other agreed-upon exceptions, by a perfected security interest in all tangible and intangible assets of the Credit Parties, except for certain customary excluded assets.
The Credit Agreement contains customary affirmative covenants, including, among
others, the provision of annual and quarterly financial statements and
compliance certificates, maintenance of property, insurance, compliance with
laws and environmental matters. The Credit Agreement contains customary negative
covenants, including, among others, restrictions on the incurrence of
indebtedness, granting of liens, making investments and acquisitions, paying
dividends, repurchases of equity interests in the Company and entering into
affiliate transactions and asset sales. The Credit Agreement contains (i) a
financial covenant for the benefit of the lenders that requires the Company to
maintain minimum Recurring Revenues (as defined in the Credit Agreement) as of
the last day of any period of four consecutive fiscal quarters of the Company
commencing with fiscal quarter ending
Item 2.02. Results of Operations and Financial Condition.
The disclosure set forth in Item 7.01 of this Current Report is incorporated by reference in its entirety into this Item 2.02.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registration.
The information set forth under Item 1.01 of this Current Report is incorporated by reference into this Item 2.03.
Item 3.02. Unregistered Sales of
The disclosure set forth in Item 1.01 of this Current Report is incorporated by reference into this Item 3.02.
The Notes will be issued to the Purchasers in reliance upon Section 4(a)(2) of the Securities Act in transactions not involving any public offering. Any shares of the Company's common stock that may be issued upon conversion of the notes will be issued in reliance upon Section 3(a)(9) of the Securities Act as involving an exchange by the Company exclusively with its security holders.
Item 7.01. Regulation FD Disclosure.
The Company issued a press release on
In accordance with General Instruction B.2. of Form 8-K, the information in this Item 7.01, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any of the Company's filings under the Securities Act, or the Exchange Act, whether made before or after the date hereof, regardless of any incorporation language in such a filing, except as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit
Number Exhibit Description
10.1 Extension Amendment, Second Amendment and First Incremental
Agreement to Credit and Guaranty Agreement.*
10.2 Purchase Agreement, dated January 9, 2023 .*
10.3 Purchase Agreement, dated January 9, 2023 . *
99.1 Press release dated, January 9, 2023 , "2U Announces Debt
Refinancing Transactions."
104 Cover Page Interactive Data File (embedded with the Inline XBRL
document).
* Schedules and other similar attachments have been omitted pursuant to
Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish
supplementally, copies of any of the omitted schedules and other similar
attachments upon request by the
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Cautionary Language Concerning Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements regarding
the Company, including statements regarding future business expectations,
strategy and intentions all of which are subject to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. All statements other
than statements of historical facts contained herein, including statements
regarding future results of operations and financial position of the Company,
including financial targets, business strategy, and plans and objectives for
future operations, are forward-looking statements. The Company has based these
forward-looking statements largely on its estimates of its financial results and
its current expectations and projections about future events and financial
trends that it believes may affect its financial condition, results of
operations, business strategy, short-term and long-term business operations and
objectives, and financial needs as of the date hereof. The Company undertakes no
obligation to update these statements as a result of new information or future
events. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions that could cause actual results to differ
materially from the results predicted, including, but not limited to: risks
related to the Company's ability to maintain minimum Recurring Revenues at
required periods during the fiscal quarters through the Maturity Date, trends in
the higher education market and the market for online education, and
expectations for growth in those markets; the acceptance, adoption and growth of
online learning by colleges and universities, faculty, students, employers,
accreditors and state and federal licensing bodies; the impact of competition on
the Company's industry and innovations by competitors; the Company's ability to
comply with evolving regulations and legal obligations related to data privacy,
data protection and information security; the Company's expectations about the
potential benefits of its cloud-based software-as-a-service technology and
technology-enabled services to university clients and students; the Company's
dependence on third parties to provide certain technological services or
components used in its platform; the Company's expectations about the
predictability, visibility and recurring nature of its business model; the
Company's ability to meet the anticipated launch dates of its degree programs,
short courses and boot camps; the Company's ability to acquire new university
clients and expand its degree programs, short courses and boot camps with
existing university clients; the Company's ability to successfully integrate the
operations of its acquisitions, including edX acquisition, to achieve the
expected benefits of its acquisitions and manage, expand and grow the combined
Company; the Company's ability to refinance its indebtedness on attractive
terms, if at all, to better align with its focus on profitability; the Company's
ability to service its substantial indebtedness and comply with the covenants
and conversion obligations contained in the indenture governing its convertible
senior notes and the credit agreement governing its revolving credit facility;
the Company's ability to generate sufficient future operating cash flows from
recent acquisitions to ensure related goodwill is not impaired; the Company's
ability to execute its growth strategy in the international, undergraduate and
non-degree alternative markets; the Company's ability to continue to recruit
prospective students for its offerings; the Company's ability to maintain or
increase student retention rates in its degree programs; the Company's ability
to attract, hire and retain qualified employees; the Company's expectations
about the scalability of its cloud-based platform; potential changes in
regulations applicable to the Company or its university clients; the Company's
expectations regarding the amount of time its cash balances and other available
financial resources will be sufficient to fund its operations; the impact and
cost of stockholder activism; the impact of the significant decline in the
market price of the Company's common stock, including the impairment of goodwill
and indefinite-lived intangible assets; the timing, structure and expected
impact of the Company's 2022 Strategic Realignment Plan and the estimated
savings and amounts expected to be incurred in connection therewith; the impact
of any natural disasters or public health emergencies, such as the coronavirus
disease 2019 pandemic; and other factors beyond the Company's control. These and
other potential risks and uncertainties that could cause actual results to
differ from the results predicted are more fully detailed under the heading
"Risk Factors" in our Annual Report on Form 10-K for the year ended
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management to predict all risks, nor can the Company assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements the Company may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated.
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