Item 1.01. Entry into a Material Definitive Agreement.
On December 3, 2021, Under Armour, Inc. (the “Company”) entered into Amendment No. 3 (the “Third Amendment”) to the Amended and Restated Credit Agreement, dated as of March 8, 2019, by and among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and arrangers party thereto (the “Initial Credit Agreement”), as amended by Amendment No. 1, dated as of May 12, 2020 (the “First Amendment”) and Amendment No. 2, dated as of May 17, 2021 (the “Second Amendment”). The Initial Credit Agreement as amended by the First Amendment and the Second Amendment is referred to herein as the “Existing Credit Agreement,” and the Existing Credit Agreement as amended by the Third Amendment is referred to herein as the “Amended Credit Agreement.”
The Amended Credit Agreement provides for a revolving credit facility commitment of $1,100.0 million, consistent with the Existing Credit Agreement. The material changes effected to the terms of the Existing Credit Agreement by the Third Amendment include the following: (i) the extension of the maturity date from March 8, 2024, to December 3, 2026; (ii) an updated pricing grid generally decreasing the applicable margins for borrowings and undrawn commitment fees; (iii) fall away of collateral and guarantee requirements following an investment-grade rating from two rating agencies; (iv) implementation of SOFR as the replacement of LIBOR as a benchmark interest rate for U.S. dollar borrowings (and analogous benchmark rate replacements for borrowings in Yen, Canadian Dollars, Pound Sterling and Euro); and (v) amending certain affirmative and negative covenants and related definitions.
The Third Amendment decreases the interest rate margins provided for in the Existing Credit Agreement and provides that borrowings under the Amended Credit Agreement will bear interest at a rate per annum equal to, at the Company’s option, either: (a) an alternate base rate (for borrowings in U.S. dollars), (b) a term rate (for borrowings in U.S. dollars, Euros, Japanese Yen or Canadian Dollars) or (c) a “risk free” rate (for borrowings in U.S. dollars or Pounds Sterling), plus in each case an applicable margin. The applicable margin for loans will be adjusted by reference to a pricing grid based on a leverage ratio of consolidated total indebtedness to consolidated EBITDA and ranges between 1.00 - 1.75% (or, in the case of alternate base rate loans, 0.00% - 0.75%). The Third Amendment also decreases the commitment fees payable by the Company on the average daily unused amount of the revolving credit facility to between 0.15% and 0.25%.
The Amended Credit Agreement continues to be primarily secured by a first-priority security interest in substantially all of the assets of the Company and its subsidiary guarantors (excluding real property, capital stock in and debt of subsidiaries of the Company holding certain real property and other customary exceptions); however, the Amended Credit Agreement provides for the permanent fall away of guarantees and collateral upon the Company’s achievement of investment grade rating from two rating agencies.
Consistent with the Existing Credit Agreement, the Amended Credit Agreement:
| | • | | contains negative covenants that, subject to significant exceptions, limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, sell assets, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates; |
| | • | | requires the Company to maintain a ratio of (i) consolidated EBITDA to consolidated interest expense of not less than 3.50 to 1.0 and (ii) consolidated total indebtedness to consolidated EBITDA of not greater than 3.25 to 1.0, as described in more detail in the Amended Credit Agreement; and |
| | • | | includes events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to other material indebtedness, bankruptcy or insolvency events, material judgment defaults and a change of control as specified in the Credit Agreement. If an event of default occurs, the commitments of the lenders to lend under the Credit Agreement may be terminated and the maturity of the amounts owed may be accelerated. |
