| ITEM 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT |
On May 14, 2019, Resolute Forest Products Inc. (the “Company”), and Resolute FP US Inc. (collectively with the Company, the “U.S. Borrowers”), Resolute FP Canada Inc. (the “Canadian Borrower” and together with the U.S. Borrowers, collectively, the “Borrowers”) entered into a Second Amendment to the Credit Agreement dated May 22, 2015, which we refer to as the “Amended credit agreement”, with certain lenders and Bank of America, N.A., as U.S. administrative agent and collateral agent (the “U.S. agent”), and Bank of America, N.A. (through its Canada branch) as the Canadian administrative agent (together with the U.S. agent, the “Agent”). The following summary of the material terms of the Amended credit agreement is qualified in its entirety by reference to the actual Amended credit agreement attached to this current report as Exhibit 10.1 and incorporated herein by reference.
General. The Amended credit agreement provides for an extension of the maturity date to May 14, 2024 of the senior secured asset-based revolving credit facility with an aggregate lender commitment of up to $500 million at any time outstanding, representing a voluntarily reduction by the Company of $100 million of the lenders’ commitment. The $500 million facility continues to include a $60 million swinglinesub-facility and a $200 million letter of creditsub-facility. The facility now features a $300 million tranche available to the U.S. Borrowers and the Canadian Borrower (the “CanadianSub-facility”), instead of a $450 million tranche under the original credit agreement, and a $200 million tranche available solely to the U.S. Borrowers (the “U.S.Sub-facility”), instead of a $150 million tranche in the original credit agreement, in each case subject to the borrowing base availability of those Borrowers. The Amended credit agreement continues to allow the Borrowers to periodically reallocate all or a portion of the commitments under the U.S.Sub-facility or the CanadianSub-facility to the othersub-facility, subject to the consent of each lender whose commitment is being reallocated. In addition, the Company may convert up to $50 million of the commitments under either the U.S.Sub-facility or the CanadianSub-facility to afirst-inlast-out facility (“FILO Facility”), subject to the consent of each converting lender.
The Amended credit agreement also continues to provide for an uncommitted ability to increase the revolving credit facility by up to $500 million, subject to certain terms and conditions set forth in the Amended credit agreement. The Amended credit agreement provides that the terms and conditions of any such increased commitment (including interest rate and commitment fees) will be identical to the terms and conditions of the original commitments.
Use of Proceeds. As of May 14, 2019, the Borrowers have no outstanding revolving loans and approximately $51 million outstanding undrawn letters of credit under the facility. In accordance with its stated purpose, the proceeds of the facility can be used by the Company for, among other things, financing the working capital needs and for general corporate purposes of the Borrowers and their subsidiaries.
Borrowing Base. Revolving loan (and letter of credit) availability under the facility is subject to a borrowing base, which at any time is equal to (a) for U.S. Borrowers, the sum of (i) 85% of eligible accounts receivable of the U.S. Borrowers and U.S. Guarantors (or 90% with respect to certain insured or letter of credit backed accounts or with accounts owed by investment grade obligors), plus (ii) the lesser of (A) 70% of the lesser of the cost or market value of eligible inventory of the U.S. Borrowers and U.S. Guarantors or (B) 85% of the net orderly liquidation value of eligible inventory of the U.S. Borrowers and U.S. Guarantors, plus (iii) 100% of the value of eligible cash and 95% of the value of permitted investments held in deposit accounts controlled solely by the Agent; and (b) for the Canadian Borrower, the sum of (i) 85% of eligible accounts receivable of the Canadian Borrower and Canadian Guarantors (or 90% with respect to certain insured or letter of credit backed accounts or with accounts owed by investment grade obligors), plus (ii) the lesser of (A) 70% of the lesser of the cost or market value of eligible inventory of the Canadian Borrower and Canadian Guarantors or (B) 85% of the net orderly liquidation value of eligible inventory of the Canadian Borrower and Canadian Guarantors, plus (iii) 100% of the value of eligible cash and 95% of the value of permitted investments held in deposit accounts controlled solely by the Agent, plus (iv) any unused portion of the U.S. borrowing base. Each borrowing base described above is subject to customary reserves and eligibility criteria, and the Agent maintains the authority to establish or modify standards of eligibility and reserves in the exercise of its reasonable discretion. The Amended credit agreement includes reserves that reduce the borrowing base, including: (i) a reserve commencing March 16, 2023 for the outstanding principal amount due under the 2023 Senior Notes issued on May 8, 2013; and (ii) a reserve for the outstanding principal amount due under the Credit Agreement dated September 7, 2016 commencing 60 days before its maturity.
Guarantees. The obligations of each of the U.S. Borrowers under the Amended credit agreement continue to be guaranteed by the other U.S. Borrower and certain U.S. subsidiaries of the Company, whom we refer to as “U.S. Guarantors”, and are secured by first priority liens on and security interests in accounts receivable, inventory and related assets of the U.S. Borrowers and the U.S. Guarantors. The obligations of the Canadian Borrower under the Amended credit agreement continue to be guaranteed by each of the other Borrowers, the U.S. Guarantors and certain Canadian subsidiaries of the Company, or the “Canadian Guarantors”, and, together with the U.S. Guarantors, the “Guarantors”, and continue to be secured by first priority liens on and security interests in accounts receivable, inventory and related assets of the Borrowers and the Guarantors.
