| Item 1.01. |
Entry into a Material Definitive Agreement. |
On June 24, 2025 (the “Closing Date”), Penguin Solutions, Inc., a Cayman Islands exempted company (the “Company” or the “Parent Borrower”), and SMART Modular Technologies, Inc., a California corporation (the “Co-Borrower” and together with the Parent Borrower, the “Borrowers”), entered into that certain Credit Agreement (the “Credit Agreement”), by and among the Borrowers, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing bank.
The Credit Agreement provides for a revolving credit facility in an aggregate principal amount of $400 million (the “Facility” and the revolving loans thereunder, the “Loans”), maturing on June 24, 2030 (subject to certain earlier “springing maturity” dates upon certain conditions specified in the Credit Agreement). The Credit Agreement provides that up to $35 million of the Facility is available for issuances of letters of credit.
On the Closing Date, the Company borrowed $100 million under the Facility, and applied such proceeds, together with $200 million of cash on hand, to repay in full all borrowings and terminate all commitments under that certain Credit Agreement, dated as of February 7, 2022 and as amended prior to the date hereof, by and among the Borrowers, the subsidiary loan parties party thereto, the lenders party thereto and Citizens Bank, N.A., as administrative agent, collateral agent and an issuing bank (the “Existing Credit Agreement”).
Under the Credit Agreement, Loans bear interest at a rate per annum equal to either, at the Borrowers’ option, a Term Secured Overnight Financing Rate (“Term SOFR”) rate or a base rate, in each case plus an applicable margin based on the Total Leverage Ratio (as defined in the Credit Agreement) of the Borrower as follows:
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| Level |
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Total Leverage Ratio |
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Base Rate
Applicable Margin |
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Term SOFR
Applicable Margin |
| 1 |
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≥ 4.50 to 1.00 |
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2.00% |
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3.00% |
| 2 |
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< 4.50 to 1.00 but ≥ 3.75 to 1.00 |
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1.75% |
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2.75% |
| 3 |
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< 3.75 to 1.00 but ≥ 3.25 to 1.00 |
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1.50% |
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2.50% |
| 4 |
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< 3.25 to 1.00 but ≥ 2.50 to 1.00 |
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1.25% |
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2.25% |
| 5 |
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< 2.50 to 1.00 but ≥ 1.75 to 1.00 |
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1.00% |
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2.00% |
| 6 |
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< 1.75 to 1.00 but ≥ 1.25 to 1.00 |
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0.75% |
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1.75% |
| 7 |
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< 1.25 to 1.00 |
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0.25% |
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1.25% |
The initial Loans under the Facility will accrue interest at the rates set forth in Level 6 above.
The Borrowers are also required to pay the lenders a quarterly commitment fee on the unused portions of the Facility at an initial rate of 0.25%, which may be increased in increments of 0.025% based on certain Total Leverage Ratio levels specified in the Credit Agreement up to a maximum rate of 0.35%. All applicable margins and commitment fees described above are expressed on a per annum basis.
The Credit Agreement contains representations and warranties and affirmative and negative covenants customary for secured financings of this type, as described in the Credit Agreement. The Credit Agreement contains a number of negative covenants that, among other things, restrict, subject to certain exceptions, the Borrowers’ ability and the ability of the Borrowers’ subsidiaries to: incur additional indebtedness; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends; make distributions or repurchase capital stock; make investments, loans or advances; repay or repurchase certain subordinated debt (except as scheduled or at maturity); create restrictions on the payment of dividends or other amounts to the Borrowers from the Borrowers’ restricted subsidiaries; make certain acquisitions; engage in certain transactions with affiliates; amend material agreements governing the Borrowers’ subordinated debt and fundamentally change the Borrowers’ business.
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