| ITEM 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT |
Senior Secured Credit Facility
On April 19, 2021 (the “Effective Date”), Resolute Forest Products Inc. (“Resolute” or the “Company”) and Resolute FP US Inc., as borrowers, and the guarantors party thereto, entered into a first amendment (the “Amendment”) to the amended and restated senior secured credit facility (the “Credit Agreement”) entered into on October 28, 2019, with American AgCredit, FLCA, as administrative agent and collateral agent.
General. The amount available under the Credit Agreement as amended by the Amendment, remains unchanged for up to $360 million (the “Senior Secured Credit Facility”) and continues to be comprised of (i) a term loan facility of up to $180 million with a delay draw period of up to 3 years and maturities of 6, 7, 8, 9 or 10 years from the date of such drawing in all cases, at the Company’s option (the “Term Loan Facility”); and (ii) a 6-year revolving credit facility of up to $180 million (the “Revolving Credit Facility”). The Senior Secured Credit Facility also continues to contemplate an uncommitted option to increase the Senior Secured Credit Facility up to an additional $360 million, subject to certain terms and conditions. On the Effective Date, the Company repaid its $180 million term loans, which had been outstanding under the Term Loan Facility prior to giving effect to the Amendment with a combination of proceeds of borrowings under the Revolving Credit Facility and cash on hand. The Amendment reinstated the full amount of the Term Loan Facility for future draws.
Interest. Interest rates under the Senior Secured Credit Facility are based, at the Company’s election, on either a floating rate based on the London Interbank Offered Rate (“LIBOR”), or a base rate, in each case plus a spread over the index. In addition, loans under the Term Loan Facility can, at the Company’s election, bear interest at a fixed rate based on the administrative agent’s cost of funds plus a spread. The Senior Secured Credit Facility also contains hardwired benchmark replacement provisions for future transition of LIBOR. The base rate is a rate determined by the administrative agent as the highest of (i) the prime rate; (ii) the federal funds effective rate plus one half of one percent; and (iii) one percent greater than the one-month LIBOR rate. The applicable spread over the index fluctuates quarterly based upon a) the Company’s capitalization ratio, which is defined as the ratio of the Company’s funded indebtedness to the sum of the Company’s funded indebtedness and its adjusted net worth; and b) in the case of the loans under the Term Loan Facility, the maturity date of such loan. For the Revolving Credit Facility, the applicable spread will range from 0.5% to 1.0% for base rate loans, and from 1.5% to 2.0% for LIBOR rate loans. For loans under the Term Loan Facility the applicable spread will range from 0.5% to 1.4% for base rate loans, from 1.5% to 2.4% for LIBOR rate loans and from 1.70% to 2.10% for fixed rate loans. The Senior Secured Credit Facility was issued by a syndicate of lenders within the farm credit system and will be eligible for patronage refunds. Patronage refunds are distributions of profits from lenders in the farm credit system, which are cooperatives that are required to distribute profits to their members. Patronage distributions, which are made in either cash or stock, are received in the year after they were earned. The Company has been notified that it can expect to receive a patronage refund in cash equal to approximately 0.9368% for the year 2020 on the average principal amount then outstanding. Future refunds will be dependent on future farm credit lender profits, made at the discretion of each farm credit lender and cannot be determined at this time.
Fees. In addition to paying interest on outstanding principal under the Senior Secured Credit Facility, the borrowers are required to pay a fee in respect of unutilized commitments based on average daily utilization for the prior fiscal quarter ranging from 0.275% to 0.325% per annum under the Revolving Credit Facility and ranging from 0.25% to 0.35% for the Term Loan Facility during the delay draw period.
Maturities. The outstanding principal balance of each term loan made under the Term Loan Facility will be subject to annual amortization payments of 5% of the initial principal amount of such term loan commencing on the fifth anniversary of each term loan’s draw date with the balance due in 6 to 10 years after the draw date. Principal amounts outstanding under the Revolving Credit Facility will be due and payable on April 19, 2027. Loans under the Revolving Credit Facility and the Term Loan Facility may be prepaid from time to time at the discretion of the borrowers without premium or penalty but subject to breakage costs, if any, in the case of LIBOR rate loans and fixed rate loans. Amounts repaid on the Term Loan Facility may not be subsequently re-borrowed. Principal amounts under the Revolving Credit Facility may be drawn, repaid, and redrawn until April 18, 2027. The Company is required to make a prepayment of 100% of the net cash proceeds in excess of $25 million in aggregate in any fiscal year from the sale or loss of any collateral, subject to certain exceptions and certain reinvestment rights.
Covenants/Events of Defaults. Pursuant to the Senior Secured Credit Facility, the borrowers are also required to maintain (i) a capitalization ratio not greater than 45% at all times; (ii) a collateral coverage ratio of not less than 1.8:1.0; and (iii) a springing consolidated fixed charge coverage ratio of 1.0:1.0, which is triggered only when adjusted availability under the Company’s credit agreement dated May 22, 2015, as amended by the first amendment dated as of December 22, 2017, by the second amendment dated as of May 14, 2019 and by the third amendment dated January 28, 2021, as further amended, restated,
