Item 1.01 Entry into a Material Definitive Agreement
Credit Agreements
U.S. $4,000,000,000 Term Loan Credit Agreement
On September 30, 2021, Baxter International Inc. (“Baxter”) entered into a new term loan credit agreement (the “Term Loan Credit Agreement”) among Baxter, as Borrower, various lenders and JPMorgan Chase Bank, National Association, as Administrative Agent, pursuant to which a syndicate of financial institutions have committed to provide Baxter with a senior unsecured term loan facility in an aggregate principal amount of $4.0 billion, consisting of $2 billion in commitments to provide loans with a three-year maturity and $2 billion in commitments to provide loans with a five-year maturity.
The aggregate principal amount of the commitments under the Term Loan Credit Agreement have replaced a corresponding amount of the commitments in respect of the $11.4 billion 364-day senior unsecured bridge term loan facility previously described in Baxter’s Current Report on Form 8-K filed on September 2, 2021 (the “Announcement 8-K”), in accordance with the terms of the bridge facility commitment letter. As a result, there are now $7.4 billion in bridge facility commitments remaining. Baxter expects to replace these remaining commitments with cash on the balance sheet and/or permanent financing in the form of the issuance of debt securities prior to the closing of the proposed acquisition of Hill-Rom Holdings, Inc. (“Hillrom”) previously described in the Announcement 8-K (the “Merger”).
The Term Loan Credit Agreement enables Baxter to borrow funds in U.S. Dollars on an unsecured basis on the closing date of the Merger in order to fund, in part, the Merger and related transactions, and pay fees and expenses related to the Merger and related transactions. The availability of loans under the Term Loan Credit Agreement is subject to the satisfaction or waiver of certain conditions that are substantially consistent with the conditions to the funding of the bridge facility, including (i) the closing of the Merger substantially concurrently with the funding of such loans, (ii) the absence of a material adverse effect with respect to Hillrom since September 1, 2021, (iii) the truth and accuracy in all material respects of certain representations and warranties, (iv) the receipt of certain certificates and (v) the receipt of certain financial statements. Loans under the Term Loan Credit Agreement will bear interest at variable rates, and will be subject to amortization at an annual rate of 0.625% for the first year and 1.25% thereafter (with loans outstanding under the five-year tranche subject to amortization at an annual rate of 1.875% after the second anniversary of the commencement of amortization and 2.500% after the third anniversary of the commencement of amortization). Baxter is also required to pay a ticking fee that will accrue on the aggregate undrawn commitments under the Term Loan Credit Agreement at a per annum rate based upon Baxter’s long-term debt rating in effect from time to time.
The Term Loan Credit Agreement contains financial and other covenants, including a net leverage ratio covenant, as well as events of default with respect to Baxter and in some circumstances its Material Subsidiaries that are customary for facilities of this type.
The description above is a summary of the Term Loan Credit Agreement and is qualified in its entirety by the complete text of the Term Loan Credit Agreement, a copy of which is attached to this report as Exhibit 10.1 and incorporated herein by reference. Capitalized terms used under this “U.S. $4,000,000,000 Term Loan Credit Agreement” subsection that are not defined herein have the meanings given to them in the Term Loan Credit Agreement.
U.S. $2,500,000,000 Five-Year Credit Agreement
On September 30, 2021, Baxter entered into a $2.5 billion, five-year revolving credit agreement (the “USD Revolving Credit Agreement”) among Baxter, as Borrower, various lenders and JPMorgan Chase Bank, National Association, as Administrative Agent. Baxter may, at its option, seek to increase the aggregate commitment under the USD Revolving Credit Agreement by up to $1.25 billion, which would result in a maximum aggregate commitment of up to $3.75 billion.
The USD Revolving Credit Agreement enables Baxter to borrow funds in U.S. Dollars on an unsecured basis at variable interest rates and contains financial and other covenants, including a net leverage ratio covenant, as well as events of default with respect to Baxter and in some circumstances its Material Subsidiaries that are customary for facilities of this type. The USD Revolving Credit Agreement also provides for the issuance of letters of credit.
