| Item 1.01. | Entry into a Material Definitive Agreement. |
0.670% Senior Notes due 2023 and 2.043% Senior Notes due 2028
On August 16, 2021, Huntington Ingalls Industries, Inc. (the “Company”) completed its previously announced offering of $400 million aggregate principal amount of 0.670% Senior Notes due 2023 (the “2023 Notes”) and $600 million aggregate principal amount of 2.043% Senior Notes due 2028 (the “2028 Notes” and, together with the 2023 Notes, the “Notes,” and such offering, the “Notes Offering”). The Notes Offering is part of the financing for the previously announced acquisition of Alion Science and Technology, pursuant to a Stock Purchase Agreement (the “Alion Purchase Agreement”), dated as of July 4, 2021, by and among Alion Holding Corp., Alion Holdings LLC, and the Company (the “Alion Acquisition”). The Company intends to use the net proceeds from the Notes Offering, together with borrowings under its term loan credit facility, to fund the purchase price for the Alion Acquisition.
The Notes were issued pursuant to an indenture, dated as of August 16, 2021 (the “Indenture”), by and among the Company, the guarantor parties thereto and U.S. Bank National Association, as trustee. The Notes will be fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of the Company’s domestic subsidiaries that guarantees debt under the Company’s amended and restated revolving credit facility and, subject to certain exceptions, any domestic subsidiaries that guarantee the Company’s debt in the future under any other credit facilities or capital markets debt. The Notes are senior unsecured obligations of the Company, and the Notes and their guarantees rank equally in right of payment with all of the Company’s and the guarantors’ existing and future unsubordinated indebtedness, but are effectively junior to all of the Company’s and the guarantors’ existing and future secured indebtedness, to the extent of the value of the assets securing that indebtedness. In addition, the Notes are structurally subordinated to all of the existing and future obligations, including trade payables, of the Company’s subsidiaries that do not guarantee the Notes.
Interest on each series of the Notes will be payable on February 16 and August 16 of each year until their respective maturity, commencing on February 16, 2022. The 2023 Notes will mature on August 16, 2023, and the 2028 Notes will mature on August 16, 2028.
Subject to certain qualifications and exceptions, the Indenture restricts the Company’s and certain of its subsidiaries’ ability to incur certain debt secured by liens or enter into certain sale and leaseback transactions, and limits the Company’s ability to consolidate, merge or sell or otherwise dispose of all or substantially all of its assets.
Upon the occurrence of a “change in control triggering event,” the Company must offer to repurchase the Notes of the applicable series at a purchase price of 101% of the principal amount of such notes plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The Indenture provides for events of default that, if certain of them occur, would permit the trustee or holders of at least 25% in aggregate principal amount of the Notes of a series then outstanding to declare the principal of and unpaid interest on the Notes of such series to be immediately due and payable.
The Company may redeem some or all of the Notes of each series in whole or in part, at a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date, plus a make-whole premium at the applicable redemption price.
If the closing of the Alion Acquisition has not occurred on or prior to the earlier of (i) April 4, 2022 (subject to an extension of up to 60 days under certain circumstances), and (ii) the date the Alion Purchase Agreement is terminated, the Company will be required to redeem all of the outstanding Notes at a redemption price equal to 101% of the aggregate principal amount of the Notes, together with accrued and unpaid interest thereof, if any, to, but excluding, the special mandatory redemption date. There is no escrow account for, or security interest in, the proceeds from the sale of the Notes.
The foregoing description of the Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the Indenture. A copy of the Indenture is filed herewith as Exhibit 4.1 and is incorporated herein by reference.
