Envision Healthcare Corporation 8.750% Senior Notes due 2026 Summary. General Terms

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Malcolm McKinney
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1 Envision Healthcare Corporation 8.750% Senior Notes due 2026 Summary This report is based on the following source document(s) Preliminary Offering Memorandum, dated September 24, 2018 Pricing Supplement, dated September 28, 2018 General Terms Issuer Enterprise Merger Sub Inc., to be merged into Envision Healthcare Corporation Guarantors : Each wholly owned domestic restricted subsidiary that guarantees the Senior Credit Facilities. Guarantors/ Security Any domestic wholly owned subsidiary that guarantees any debt of Envision or a guarantor in excess of $100 million must guarantee the 2026 Notes. As of June 30, non-guarantors accounted for 77% (or $6.3 billion) of consolidated net revenues and 35% (or $5.1 billion) of total assets. Permitted Holders Collateral : Unsecured Kohlberg Kravis Roberts & Co. L.P. and its affiliates, other than its portfolio companies, and management investors. Indenture Trustee Wilmington Trust, National Association Series of Notes $1.225 billion of 8.750% Senior Notes due 2026 Reporting Requirements Although Envision is required to file financials as though it were a public company, it is not required to deliver consolidating financial information. Make Whole Redemption Equity Clawback Call Schedule Change of Control Offer Make Whole available prior to Oct. 15, 2021 (calculated using T plus 50 bps). Equity clawback available prior to Oct. 15, 2021, for up to 40% of the 2026 Notes at (at least 50% of original principal amount must remain outstanding) within 180 days of the Equity Offering. "Equity Offering" is not limited to public equity offerings. On and after Oct. 15, 2021, Envision can redeem the 2026 Notes at a price equal to: 2021: %; 2022: %; and 2023 and thereafter: % Put Option upon a Change of Control. Sale or all or substantially all assets of Envision and its subsidiaries, other than to any Permitted Holders. Change of Control Change of Control o If the Minority Business Disposition Condition is met, neither a Minority Business Disposition or a Minority Business Offering will constitute a sale of all or substantially all of Envision s assets. Minority Business Disposition Condition means either $1 of additional Ratio Debt could

2 be incurred or the FCCR or leverage ratio would not be worse than the ratio prior to the disposition. Minority Business Disposition means sale of assets or equity of any business of Envision and its subsidiaries that represents less than 50% of EBITDA such that such Minority Business Subsidiary is no longer a restricted subsidiary. Minority Business Offering means a public offering of any Minority Business Subsidiary. Drag-Along Rights Envision becomes aware of any person or group, other than the Permitted Holders, acquiring 50% or more of its voting stock. In connection with any tender offer or other offer to purchase all the 2026 Notes, including a CoC offer, if Holders of 90% participate, Envision may redeem all remaining notes at the tender offer price. Despite non-subsidiary guarantors accounting for 77% of Envision s consolidated net revenues, the 2026 Notes do not require Envision to deliver consolidating financial statements, which may make it difficult for holders to determine EBITDA and available cash attributable to the credit group. Negative Covenants The negative covenants apply to Envision and the restricted subsidiaries (the liens covenant only applies to Envision and the guarantors). Envision can designate a restricted subsidiary as an unrestricted subsidiary, subject to: 1. The subsidiary does not hold any debt or equity of, or a lien on the property of, Envision or any restricted subsidiary. 2. The subsidiary does not own or later incur any debt that is recourse to Envision or any restricted subsidiary. 3. The designation is permitted under the Restricted Payments covenant EBITDA/Cash Netting Financial Definitions EBITDA add-backs include reasonably identifiable losses attributable to any New Project from the commencement of operations or the signing of the purchase agreement for 24 months. Add-backs also include projected net cost savings from acquisitions, dispositions and other transactions and initiatives. Cost savings can be projected from actions that have either been taken or initiated or are expected to be taken within 24 months after any transaction or initiative. Add-backs through the definition of Consolidated Net Income include restructuring charges and other business optimization charges. All unrestricted cash is permitted to be netted from debt; Permitted Receivables Financing does not constitute Indebtedness. 2

3 Debt and Liens Debt under Credit Facilities, other than the ABL Facility, not to exceed the sum of (i) $5.35 billion, plus (ii) the greater of $1.016 billion and 100% of EBITDA, plus (iii) after amounts under clauses (i) and (ii) have been incurred, additional amounts in compliance with a 4.83x secured leverage ratio, plus Credit Facilities Credit Facilities Basket Liens Basket Debt under the ABL Facility not to exceed the greater of $550 million and the Borrowing Base, less amounts outstanding under Permitted Receivables Financings (which can be secured by a corresponding liens basket). Borrowing Base is the sum of 85% of accounts receivable and 80% of inventory. Permitted Receivables Financing means non-recourse receivables that constitute term or receivables securitizations or other receivables securitization, in each case, not to exceed 85% of accounts receivable. Liens securing Credit Facilities under the Credit Facilities debt basket. Definition of Credit Facilities Includes bank and capital markets debt. Private Placement Notes Existing Debt/Liens Ratio Debt/Leverage Liens Acquisition Debt General Debt/General Liens $525 million of senior unsecured notes due 2026 issued in a private placement. Existing Debt : Carves-out debt under the Credit Facilities basket, the 2026 Notes and the Private Placement Notes. Existing Liens : Carves-out liens securing the Senior Credit Facilities. Ratio Debt : Compliance with a 2x FCCR or a 6.95x total leverage ratio. Leverage Liens : Compliance with a 4.83x secured leverage ratio. Greater of $510 million and 50% of EBITDA, plus additional amounts if either $1 of additional Ratio Debt could be incurred or the FCCR or total leverage ratio would not be worse than the ratio prior to incurrence; may be secured (i) if the secured leverage ratio would not exceed either 4.83x or the ratio prior to incurrence or (ii) by the assets of the acquired entity. General Debt :Greater of $510 million and 50% of EBITDA; may be secured by a corresponding liens basket. 3

4 General Liens : Greater of $510 million and 50% of EBITDA. Non-Guarantor Restricted Subsidiaries Contribution Debt Sale and Lease-Backs Purchase Money Refinancing Restrictions Greater of $510 million and 50% of EBITDA, plus Ratio Debt, plus Acquisition Debt not to exceed, in the aggregate, the greater of $405 million and 40% of EBITDA; may be secured by the assets of non-guarantor restricted subsidiaries. Debt equal to 200% of proceeds received by Envision since the issue date that have not been used to make restricted payments; may be secured by a corresponding liens basket. Debt incurred pursuant to any Sale and Lease-Back; may be secured by a corresponding liens basket. Greater of $430 million and 42.5% of EBITDA; may be secured by the assets being financed. There are no explicit restrictions that would prohibit junior lien debt from being refinanced with senior lien debt or unsecured debt from being refinanced with secured debt, subject to liens capacity. Reclassification Outstanding debt under the Senior Credit Facilities on the issue date will be deemed incurred under the Credit Facilities debt basket. In addition to Envision s additional secured debt capacity, which we discussed in the main analysis, non-guarantor restricted subsidiaries will be permitted to incur at least $915 million of debt, all of which will be structurally senior to the 2026 Notes. Restricted Debt Available Amount Leverage-Based Restricted Payments Post-IPO General Restricted Payments Restricted Payments Debt that is subordinated in right of payment to the 2026 Notes. Restricted Payments out of the Builder Basket if, for dividends and prepayments, no Event of Default or, if for Restricted Investments, no payment or bankruptcy Event of Default. Builder Basket is based on 100% of EBITDA (from the FQ in which the issue date occurs), less 1.5x interest expense, plus other typical amounts, plus the greater of $355 million and 35% of EBITDA. If no Event of Default, compliance with a 6x total leverage ratio or, for Restricted Investments, a 6.25x total leverage ratio. Dividends not to exceed 6% of proceeds received by Envision, plus 7% of market capitalization. Greater of $355 million and 35% of EBITDA, if no Event of Default. 4

5 Excluded Contributions Unrestricted Subsidiaries Specified Disposition Proceeds Receivables Fees Restricted Payments not to exceed the proceeds from Excluded Contributions received since the issue date, to the extent such proceeds do not increase the Builder Basket. Distributions of equity of unrestricted subsidiaries (other than unrestricted subsidiaries whose primary asset is cash and equivalents). Restricted Payments not to exceed any Specified Disposition Proceeds remaining after any required repayment of debt, if in compliance with a 6.95x leverage ratio. Distributions of Receivables Fees and purchases of receivables under Permitted Receivables Financings. Restricted Subsidiaries Leverage-Based Investments Investments within the restricted group, including in non-guarantor restricted subsidiaries. Compliance with a 6.25x total leverage ratio. Acquisitions Acquisitions of entities that become, or are merged into, a restricted subsidiary. Permitted Investments Similar Business General Investments Permitted Receivables Financing Unrestricted Subsidiaries Greater of $430 million and 42.5% of EBITDA. Greater of $430 million and 42.5% of EBITDA. Investments in SPEs in the form of assets related to a Permitted Receivables Financing (including contributions to fund such purchases). Greater of $255 million an 25% of EBITDA. Hospital Joint Ventures 50% of EBITDA. There is no leverage test required to make restricted payments out of the Builder Basket. Typically, dividends and prepayment of restricted debt from builder baskets require the issuer to meet a 2x interest coverage test. The Post-IPO dividends basket permits dividends not to exceed 6% per annum of proceeds received by Envision, plus 7% of market capitalization. Whereas most sponsor financings permit post-ipo dividends based on either proceeds received or market capitalization, most do not permit both. In addition, permitting dividends based on market capitalization could allow Envision to pay outsize dividends, given market capitalization often does not have a direct correlation to financial health. 5

6 Asset Sales Specified Dispositions, as long as Envision repays debt under the Senior Credit Facilities and Private Placement Notes in an amount equal to the greater of the Applicable Specified Disposition Percentage and an amount sufficient to ensure compliance with a 4.83x secured leverage ratio and a 6.95x total leverage ratio. Specified Dispositions Specified Dispositions are dispositions by Envision or a restricted subsidiary of all or a portion of their ambulatory surgical center. Carve-Outs to Definition of Asset Sale Applicable Specified Disposition Percentage means the percentage equal to (i) the Senior Credit Facilities and Private Placement Notes funded on the issue date over (ii) the Senior Credit Facilities and Private Placement Notes funded on the issue date, plus cash common equity contributed to Envision on the issue date, plus rollover equity on the issue date. De Minimis Asset Sale Exclusion Aggregate Asset Sale Exclusion Restricted Group Assets sold for fair market value for less than the greater of $100 million and 10% of EBITDA. Assets sold for fair market value not to exceed the greater of $355 million and 35% of EBITDA. Asset sales within the restricted group, including to non-guarantor restricted subsidiaries. Unrestricted Subsidiaries Accounts Receivable Sale and Lease-Backs Dispositions of equity of unrestricted subsidiaries. Sales of accounts receivable pursuant to any Permitted Receivables Financing. Sales of assets acquired after the issue date pursuant to Sale and Lease-Backs. Broad Carve-Out Assets sold at fair market value, as long as 75% of consideration for such asset sale, together will all other asset sales since the issue date, consists of cash (which includes assumption of non-payment subordinated debt; 6

7 100% of EBITDA for the measure period of non-cash consideration will be considered cash). Within 540 days, to: Repay: Application of Proceeds Credit Facility debt (with permanent reduction of revolving commitments if such repaid debt is revolving debt); Secured debt of Envision or a guarantor (with permanent reduction of revolving commitments if such repaid debt is revolving debt); Any other debt of Envision or any restricted subsidiary, as long as the 2026 Notes are ratably repaid at par; or Debt of non-guarantor restricted subsidiaries. Reinvest in business (with additional 180 days if committed to be used within a 540-day period). Excess Proceeds $100 million is applied to repay the 2026 Notes and, if required, other pari passu debt on pro rata basis at par. Envision has 540 days in which it must apply asset sale proceeds to either repay debt or reinvest in the business. This is significantly longer than the more common 365-day period. In addition, 100% of EBITDA of non-cash consideration will be deemed cash for purposes of ensuring that 75% of consideration consists of cash and equivalents. This could allow Envision to consummate a significant amount of asset sales without receiving proceeds that are required to be used for repayments or reinvestment. Fundamental Changes If no Event of Default, Envision may merge with a third party as long as it survives or the surviving entity is organized in the U.S. and assumes Envision s obligations under the 2026 Notes, if either $1 of additional Ratio Debt could be incurred or the FCCR or leverage ratio would not be worse than the ratio prior to the transaction. Suspended Covenants Unrestricted Subsidiaries Trigger/Release Fall-Away Covenant Debt, Restricted Payments, Dividend Blockers, Asset Sales, Affiliate Transactions, Future Guarantees and compliance with the FCCR for mergers and guarantor mergers. Existing Guarantees are automatically suspended Unrestricted subsidiaries may not be designated during suspension period. Trigger : Notes are rated investment grade and no Default. Release : Subsequent downgrade below investment grade. 7

8 Events of Default Events of Default, Amendments, Assignments Events of Default Waive Default Acceleration Amendments Voting Events of default include cross-acceleration/cross-principal payment at final maturity on debt in excess of the greater of $150 million and 15% of EBITDA. Holders of a majority of the 2026 Note balance may waive default. Holders of 30% of the 2026 Note balance may accelerate. 50% for amendments and waivers (explicitly excludes 2026 Notes held by affiliates). 100% for fundamental matters (does not explicitly exclude 2026 Notes held by affiliates). Neither Issuer, nor the Permitted Holders, are permitted to acquire loans, which is uncommon, though favorable for lenders. Note that the disqualified lender list cannot be updated after closing, even to add competitors. Reorg Research, Inc. makes no representation or warranty, express or implied, as to the completeness or accuracy of this information and assumes no responsibility to update this information. This information is not, and should not be construed as, an offer to sell or the solicitation of an offer to buy any securities. The information contained in this report is provided for informational purposes only and should not be construed as legal, investment, accounting or other professional services advice on any subject matter. Receipt of this report does not create an attorney-client relationship with Reorg Research. Reorg Research, Inc. does not act as a broker, dealer or investment adviser. Prior to making any investment decision, you are advised to consult with your broker, investment adviser, or other appropriate tax or financial professional to determine the suitability of any investment. Reorg Research, Inc. shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. 8

Staples, Inc. 8.5% Senior Notes due 2025 Summary. General Terms

Staples, Inc. 8.5% Senior Notes due 2025 Summary. General Terms This report is based on the following source document(s) Indenture, dated August 28, 2017 General Terms Issuer Staples, Inc., a Delaware corporation Guarantors/ Security Guarantors : The same subsidiary