Resources Connection (RECN) Plans 6M Share Modified Dutch Auction Tender at $13.50-$16

Resources Connection (NASDAQ: RECN) disclosed in an SEC filing:

On October 17, 2016, Resources Connection, Inc. (the “Company”), Resources Connection LLC and their domestic subsidiaries entered into a Credit Agreement (the “Credit Facility”) with Bank of America, N.A. The Credit Facility provides for a $120.0 million secured revolving loan, consisting of a (i) $90,000,000 revolving facility, which includes a $5,000,000 sublimit for the issuance of standby letters of credit, and (ii) a $30,000,000 reducing revolving facility, any amounts of which may not be reborrowed after being repaid. The proceeds of the Credit Facility may be used to fund the Company’s working capital, refinance certain indebtedness, fund potential acquisitions and finance the purchase by the Company of shares of its common stock in connection with the tender offer described in Item 8.01 below. The Credit Facility is scheduled to mature on October 17, 2021.

The obligations under the Credit Facility are secured by substantially all assets of the Company, Resources Connection LLC and their domestic subsidiaries pursuant to the Security and Pledge Agreement, dated October 17, 2016.

As of the date hereof, there are no borrowings outstanding under the Credit Facility, except for certain Letters of Credit of approximately $1.5 million issued under a predecessor agreement. Borrowings under the Credit Facility will bear interest at a rate per annum of either, at the Company’s election, (i) LIBO Rate (as defined in the Credit Facility) plus a margin of 1.25% or 1.50% or (ii) the Base Rate (as defined in the Credit Facility), plus a margin of 0.25% or 0.50%, with the applicable margin depending on the Company’s consolidated leverage ratio. The Company is also obligated to pay other customary facility fees for a credit facility of this size and type.

The Credit Facility contains customary covenants, including covenants that limit or restrict the Company’s and its subsidiaries’ ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and make dispositions of assets. Upon the occurrence of an event of default under the Credit Facility, the lender may cease making loans, terminate the Credit Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults.

The foregoing description of the Credit Facility and the Security and Pledge Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Credit Facility, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference, and the full text of the Security and Pledge Agreement, which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Item 8.01 Other Events.

The Company intends to commence a modified “Dutch auction” tender offer to purchase up to approximately 6,000,000 shares of its common stock at a price per share not greater than $16.00 nor less than $13.50. The tender offer is expected to commence on or about October 18, 2016 and will remain open for at least 20 business days. The tender offer will be subject to certain conditions described in the tender offer documents, which will be distributed to shareholders upon commencement of the offer. These documents will also contain tendering instructions and a complete explanation of the tender offer’s terms and conditions.

As of October 12, 2016, the Company had approximately 36.1 million shares of common stock outstanding. The Company intends to finance the tender offer from cash on hand and borrowings under the new Credit Facility described in Item 1.01 above.

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