| Item 1.01. | Entry into a Material Definitive Agreement. |
On December 21, 2020, Kraton Polymers LLC (“Kraton LLC”) and Kraton Polymers Capital Corporation (together with Kraton LLC, the “Issuers”), wholly-owned subsidiaries of Kraton Corporation (the “Company”), closed their previously announced private offering (the “Notes Offering”) of $400.0 million in aggregate principal amount of 4.25% Senior Notes due 2025 (the “New Notes”) to certain initial purchasers for resale to persons reasonably believed to be qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons in accordance with Regulation S under the Securities Act. The New Notes are general senior unsecured obligations of the Issuers and are guaranteed on a senior unsecured basis by the Company and certain of its wholly-owned domestic subsidiaries that guarantee the U.S. dollar denominated borrowings under the Company’s existing asset-based revolving loan facility and outstanding senior notes (collectively, the “Guarantors”).
The New Notes were issued pursuant to an Indenture, dated as of December 21, 2020 (the “New Notes Indenture”), among the Issuers, the Guarantors and Wells Fargo Bank, National Association, as trustee (the “Trustee”). The New Notes mature on December 15, 2025. The Issuers will pay interest on the New Notes on June 15 and December 15 of each year, commencing on June 15, 2021, at a rate of 4.25% per annum. The net proceeds of the Notes Offering are being used, together with cash on hand, to fund the redemption of all of the Issuers’ outstanding 7.000% Senior Notes due 2025 (the “Old Notes”) and to pay related fees and expenses of the refinancing as discussed in more detail under Item 1.02 below.
At any time prior to December 15, 2022, the Issuers may redeem all or a part of the New Notes at a redemption price equal to 100% of the principal amount of the New Notes to be redeemed plus accrued and unpaid interest, if any, to, but not including, the date of redemption and a “make-whole” premium. In addition, at any time prior to December 15, 2022, the Issuers may redeem up to 40% of the aggregate principal amount of the New Notes with funds in an aggregate amount not exceeding the net proceeds of certain equity offerings at a redemption price equal to 104.250% of the principal amount of the New Notes to be redeemed plus accrued and unpaid interest, if any, to, but not including, the date of redemption. The Issuers may make that redemption only if, after the redemption, at least 50% of the aggregate principal amount of New Notes issued under the New Notes Indenture remains outstanding (unless all such New Notes are otherwise repurchased or redeemed substantially concurrently with such redemption). During the twelve month-period beginning on December 15, 2022, December 15, 2023 and December 15, 2024, the Issuers may redeem all or a part of the New Notes at a redemption price equal to 102.125%, 101.063% and 100.000% of the principal amount to be redeemed, respectively, in each case plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
Upon the occurrence of both a Change of Control and a Rating Decline (each as defined in the New Notes Indenture), each holder has the right to require the Issuers to offer to repurchase all or any part of such holder’s New Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
The Issuers are not required to make mandatory sinking fund payments with respect to the New Notes.
The New Notes Indenture contains various other covenants and obligations to which the Company and its subsidiaries are subject to while the New Notes are outstanding. The covenants in the New Notes Indenture limit the ability of the Company and its subsidiaries to, among other things: (i) incur additional debt; (ii) pay dividends or make other restricted payments; (iii) purchase, redeem or retire capital stock or subordinated debt; (iv) make asset sales; (v) enter into transactions with affiliates; (vi) incur liens; (vii) provide guarantees; (viii) make investments; and (ix) consolidate, amalgamate, combine or merge with any other person. The New Notes Indenture also contains customary events of default for transactions of this type and amount.
