WEX scores investment

The Private Placement is subject to customary closing conditions and is expected to close in the next several days. Importantly, WEX has also obtained an amendment to its existing senior secured credit facilities, (the “Credit Agreement Amendment”), providing WEX with increased financial flexibility. The combination of the investment and the credit agreement amendment will strengthen WEX’s financial profile and will enable the Company to remain focused on its strategic initiatives as it navigates the global COVID-19 pandemic.

“We are pleased to further fortify our balance sheet during the current uncertain operating environment while reaffirming our relationship with Warburg Pincus, who has demonstrated their strong commitment to the future growth of WEX,” said Melissa Smith, WEX’s Chair and Chief Executive Officer. Ms. Smith continued, “The combination of this investment and the recent credit agreement amendment put us in an even stronger financial position with additional financial flexibility, improved liquidity and increased cash on hand. This better positions us to remain focused on our long-term strategic initiatives to drive our future success, and capitalize on the economic recovery when market conditions improve.”

Chandler Reedy and Stephanie Geveda, Managing Directors at Warburg Pincus, commented, “We are honored to once again invest behind the strong management team at WEX to further support its long-term commitment to market leadership, innovation and growth. Given our deep familiarity and relationship with the Company, we are confident WEX has the capabilities and resources to emerge from the current environment stronger than ever.”

Private Placement of Convertible Notes and Common Stock

Warburg Pincus is buying 577,254 shares of common stock for an aggregate investment of approximately $90 million at $155.91 per share. The closing price on June 26, 2020 was $155.51.

Warburg Pincus is also purchasing $310 million in principal amount of convertible notes with net proceeds of approximately $299 million under the following terms:

• The convertible notes have a 7 year term and are non-transferable for one year, subject to certain exceptions
• Interest payable in cash, through accretion to the principal amount of the convertible notes or a combination of cash and accretion, at WEX’s option, at a rate of 6.5% per annum
• Convertible to shares of common stock at any time at the option of Warburg Pincus, based on an initial conversion price of $200 per share (subject to adjustment in certain circumstances in accordance with the terms of the notes), with conversions to be settled in shares of WEX common stock, cash or a combination thereof, at WEX’s election
• WEX will have the right, at any time following the third anniversary of closing of the investment, to redeem the notes in whole or in part if the closing price of WEX’s common stock is at least 200% of the conversion price of the notes for 20 out 30 days prior to the time WEX delivers a redemption notice, subject to the right of Warburg Pincus to convert its convertible notes prior to the redemption date
• In the event of certain fundamental change transactions, Warburg Pincus will have the right to require WEX to repurchase its convertible notes in accordance with the terms of the convertible notes
• After giving effect to the purchase of the common stock and the convertible notes, on an as-converted basis, Warburg Pincus will own approximately 4.7% of WEX’s outstanding common stock
• Mr. James Neary will continue to serve on WEX’s board of directors following completion of the transaction pursuant to a director nomination right granted to Warburg Pincus in connection with the transaction

Amendment of Credit Facility

The Credit Agreement Amendment, among other things:

Increases the current maximum Consolidated Leverage Ratio to 5.5X through 12/31/2020 and stepping down thereafter

Permits an unlimited amount of corporate cash to be netted from the financing debt balance for financial covenant purposes following the closing of the Private Placement for up to six months following resolution of the eNett and Optal transaction and permanently increases the amount of cash netting allowed to $250 million if the eNett and Optal transaction does not close or $400 million if it does close

Adds a fourth pricing tier in the case that leverage exceeds 5.5X at Libor plus 3% and introduces a Libor floor on revolving credit facility borrowings of 75 basis points

In connection with the Credit Agreement Amendment, WEX also amended and restated the debt commitment letter entered into in connection with the eNett and Optal transaction (the “Amended and Restated Commitment Letter”) to, among other things, reallocate the $1.352 billion of aggregate commitments from (x) a $1.052 billion seven-year term loan B facility and a $300 million senior unsecured bridge facility to (y) a $752 million seven-year term loan B facility and a $600 million senior secured bridge facility. WEX has also secured additional financial covenant relief to the Consolidated Leverage Ratio and Coverage Ratio in the Credit Agreement Amendment in connection with the eNett and Optal transaction. The maximum Consolidated Leverage Ratio increases to 7.5X by year end and stepping down thereafter if the eNett and Optal transaction were to close.

The foregoing summary of the Private Placement, the Amended and Restated Commitment Letter and Credit Agreement Amendment is only a summary, and is qualified in its entirety by reference to the definitive agreements governing the private placement, the Amended and Restated Commitment Letter and the Credit Agreement Amendment, copies of which will be filed with the Securities and Exchange Commission (“SEC”) as an exhibit to a Current Report on Form 8-K.

As previously disclosed, (i) WEX has concluded that the SARS-CoV-2 pandemic and conditions arising in connection with it have had, and continue to have, a material adverse effect on the businesses of eNett and Optal, which is disproportionate to the effect on others in the relevant industry, (ii) WEX has advised eNett and Optal that it is not required to close the acquisition of eNett and Optal because of this material adverse effect and (iii) the shareholders of eNett and the shareholders of Optal have each initiated separate legal proceedings against WEX by filing claims in the High Court of Justice of England and Wales in the United Kingdom denying that there has been a material adverse effect (as defined in the purchase agreement for the eNett and Optal transaction) and seeking, among other things, specific performance of WEX’s obligations under the purchase agreement. WEX intends to continue to vigorously defend against these claims, and there has been no change with respect to WEX’s position regarding its obligations under the purchase agreement, including its conclusion that a material adverse effect has occurred and that it is not required to close the transaction. However, while the litigation is pending, WEX remains subject to certain obligations under the purchase agreement, including with respect to financing matters, and the Amended and Restated Commitment Letter and the provisions of the Credit Agreement Amendment addressing the acquisition of eNett and Optal are intended to ensure compliance with these obligations.

BofA Securities served as exclusive financial advisor to WEX, and Wilmer Cutler Pickering Hale and Dorr LLP served as its legal counsel. Cleary Gottlieb Steen & Hamilton LLP served as legal counsel to Warburg Pincus.