Harmonic Announces New $160 Million Credit Facility

Rhea-AI Summary

Harmonic Inc. (NASDAQ: HLIT) announced a new five-year, $160 million Credit Facility with a lending syndicate led by Citibank, N.A. The facility replaces the existing $25 million line of credit with JPMorgan Chase Bank, N.A. The Credit Facility includes a $120 million secured revolving loan facility, a $40 million secured delayed draw term loan facility, and an option to request $100 million or more in additional loan commitments under an accordion feature. The CFO, Walter Jankovic, highlighted the increased liquidity, stronger balance sheet, and financial flexibility provided by the facility, supporting the company's multi-year growth plan and ongoing strategic review of the Video business.

Insights

Financial Analyst

Harmonic Inc.'s new credit agreement is a significant financial maneuver, increasing liquidity and providing the company with a more robust safety net. The $160 million facility is a substantial upgrade from the previous $25 million line of credit, indicating a strategic move to strengthen the company's financial position. The inclusion of a $120 million revolving loan and a $40 million term loan, along with the accordion feature that could potentially add $100 million more, suggests that Harmonic is positioning itself for aggressive growth or acquisitions.

In the short term, this could improve investor confidence, as the ability to redeem 2024 Convertible Notes and continue share buybacks may lead to a more favorable capital structure and potentially enhance earnings per share. Long-term implications include the ability to support strategic initiatives such as the review of the Video business, which could result in divestiture or restructuring, aimed at streamlining operations and focusing on core competencies.

However, stakeholders should monitor the company's leverage ratios and interest coverage to ensure that the increased debt does not adversely affect financial stability. The terms of the credit agreement, such as interest rates and covenants, will be crucial in evaluating the financial prudence of this decision.

Industry Analyst

The credit facility arrangement by Harmonic Inc. with prominent financial institutions underscores a vote of confidence in the company's market position and creditworthiness. By replacing the existing credit line with a significantly larger one, the company demonstrates both the need for greater capital and the willingness of lenders to back its initiatives.

For industry observers, the move is indicative of Harmonic's commitment to its multi-year growth plan, which likely involves capital-intensive projects such as research and development or market expansion. The ability to redeem convertible notes also suggests a strategic approach to managing dilution and controlling the equity structure, which is a positive signal to shareholders about the company's attention to shareholder value.

It is important to note that the use of these funds will be a determinant in the long-term success of this financial strategy. If deployed effectively in areas that yield high returns, the company could see substantial growth. Conversely, if the capital is not utilized efficiently, it could lead to an increased debt burden without corresponding returns, potentially impacting the company's profitability and stock performance.

Legal Expert

Entering into a new credit agreement involves complex legal considerations and negotiations, especially when multiple lenders and features such as an accordion option are included. Harmonic Inc.'s agreement with the lending syndicate will be governed by a set of covenants that dictate the company's operations to certain extents to protect the lenders' interests.

These covenants may include limitations on additional indebtedness, restrictions on mergers and acquisitions and maintenance of certain financial ratios. The legal framework of the credit agreement will also outline the conditions under which the company can access the additional $100 million loan commitments, which could be tied to financial performance or other strategic milestones.

For stakeholders, understanding the legal obligations and restrictions imposed by the credit agreement is essential, as they can significantly influence corporate strategy and financial planning. Any breach of these covenants could lead to defaults, impacting the company's financial health and operational freedom. Therefore, the company's compliance with these legal terms will be a critical factor in maintaining financial stability and pursuing its growth objectives.

SAN JOSE, Calif., Dec. 21, 2023 /PRNewswire/ -- Harmonic Inc. (NASDAQ: HLIT) today announced that it has entered into a new five-year, $160 million committed credit agreement (the "Credit Facility") with a lending syndicate led and arranged by Citibank, N.A., co-led by JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC, and includes HSBC and MUFG as additional lenders. The Credit Facility replaces the Company's existing $25 million line of credit with JPMorgan Chase Bank, N.A.

The Credit Facility provides for a $120 million secured revolving loan facility, a $40 million secured delayed draw term loan facility, and an option, subject to certain conditions, to request $100 million or more in additional loan commitments under an accordion feature in the Credit Facility.

"We are pleased to announce this new facility, which provides us increased liquidity and a stronger balance sheet, reinforcing our multi-year growth plan," said Walter Jankovic, chief financial officer of Harmonic. "The Credit Facility also affords us greater financial flexibility, including the ability to redeem our 2024 Convertible Notes and continue buybacks under our existing share repurchase program. Additionally, this facility provides the versatility to support our previously announced ongoing strategic review of the Video business, aimed at generating long-term shareholder value."

About Harmonic Inc. 

Harmonic (NASDAQ: HLIT), the worldwide leader in virtualized broadband and video delivery solutions, enables media companies and service providers to deliver ultra-high-quality video streaming and broadcast services to consumers globally. The company revolutionized broadband networking via the industry's first virtualized broadband solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers' homes and mobile devices. Whether simplifying OTT video delivery via innovative cloud and software platforms, or powering the delivery of gigabit internet cable services, Harmonic is changing the way media companies and service providers monetize live and on-demand content on every screen. More information is available at www.harmonicinc.com.

Legal Notice Regarding Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding Harmonic's business growth, stock repurchase program, strategic review of the Video business, and redemption of the 2024 Convertible Notes. These statements are based on our current expectations and beliefs and are subject to risks and uncertainties, including, but not limited to, the fact that stock repurchases may not be conducted in the timeframe or in the manner Harmonic expects, or at all; that the strategic review of the Video business may not result in any transaction; and that our growth plan may not succeed within the timeframe or to the level that Harmonic expects due to the risks and uncertainties more fully described in Harmonic's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended Dec. 31, 2022, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to Harmonic as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.

Harmonic, the Harmonic logo and other Harmonic marks are owned by Harmonic Inc. or its affiliates. All other trademarks referenced herein are the property of their respective owners.

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SOURCE Harmonic Inc.

FAQ

What did Harmonic Inc. (NASDAQ: HLIT) announce?

Harmonic Inc. announced a new five-year, $160 million Credit Facility with a lending syndicate led by Citibank, N.A.

Who led and arranged the new Credit Facility for Harmonic Inc. (NASDAQ: HLIT)?

The new Credit Facility was led and arranged by Citibank, N.A., co-led by JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC, and includes HSBC and MUFG as additional lenders.

What does the new Credit Facility for Harmonic Inc. (NASDAQ: HLIT) provide?

The Credit Facility includes a $120 million secured revolving loan facility, a $40 million secured delayed draw term loan facility, and an option to request $100 million or more in additional loan commitments under an accordion feature.

Who commented on the new Credit Facility for Harmonic Inc. (NASDAQ: HLIT)?

Walter Jankovic, the chief financial officer of Harmonic, commented on the new Credit Facility, highlighting the increased liquidity, stronger balance sheet, and financial flexibility it provides.

What is the purpose of the new Credit Facility for Harmonic Inc. (NASDAQ: HLIT)?

The new Credit Facility provides increased liquidity and a stronger balance sheet, reinforcing the company's multi-year growth plan and ongoing strategic review of the Video business.