CDW 2015 Annual Report Download - page 17

Table of Contents
• increasing our vulnerability to both general and industry-specific adverse economic conditions; and
• limiting our ability to obtain additional debt or equity financing to fund future working capital, capital expenditures, acquisitions or other general corporate
requirements and increasing our cost of borrowing.
Restrictive covenants under our senior credit facilities and, to a lesser degree, our indentures may adversely affect our operations and liquidity.
Our senior credit facilities and, to a lesser degree, our indentures contain, and any future indebtedness of ours may contain, various covenants that limit our ability
to, among other things:
• incur or guarantee additional debt;
• pay dividends or make distributions to holders of our capital stock or to make certain other restricted payments or investments;
• repurchase or redeem capital stock;
• make loans, capital expenditures or investments or acquisitions;
• receive dividends or other payments from our subsidiaries;
• enter into transactions with affiliates;
• create liens;
• merge or consolidate with other companies or transfer all or substantially all of our assets;
• transfer or sell assets, including capital stock of subsidiaries; and
• prepay, repurchase or redeem debt.
As a result of these covenants, we are limited in the manner in which we conduct our business and we may be unable to engage in favorable business activities or
finance future operations or capital needs. A breach of any of these covenants or any of the other restrictive covenants would result in a default under our senior credit
facilities. Upon the occurrence of an event of default under our senior credit facilities, the lenders:
• will not be required to lend any additional amounts to us;
• could elect to declare all borrowings outstanding thereunder, together with accrued and unpaid interest and fees, to be due and payable; or
• could require us to apply all of our available cash to repay these borrowings.
The acceleration of amounts outstanding under our senior credit facilities would likely trigger an event of default under our existing indentures.
If we were unable to repay those amounts, the lenders under our senior credit facilities could proceed against the collateral granted to them to secure our borrowings
thereunder. We have pledged a significant portion of our assets as collateral under our senior credit facilities. If the lenders under our senior credit facilities accelerate the
repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our senior credit facilities and our other indebtedness or the ability to borrow
sufficient funds to refinance such indebtedness. Even if we were able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable
to us.
In addition, under our Revolving Loan, we are permitted to borrow an aggregate amount of up to $1,250.0 million. However, our ability to borrow under our
Revolving Loan is limited by a borrowing base and a liquidity condition. The borrowing base at any time equals the sum of up to 85% of CDW LLC and its subsidiary
guarantors’ eligible accounts receivable (net of accounts reserves) (up to 30% of such eligible accounts receivable which can consist of federal government accounts
receivable) plus the lesser of (i) 75% of CDW LLC and its subsidiary guarantors’ eligible inventory (valued at cost and net of inventory reserves) and (ii) the product of 85%
multiplied by the net orderly liquidation value percentage multiplied by eligible inventory (valued at cost and net of inventory reserves), less reserves (other than accounts
reserves and inventory reserves). The borrowing base in effect as of December 31, 2015 was $1,423.1 million , and therefore, did not restrict our ability to borrow under our
Revolving Loan as of that date.
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