| Item 1.01. | Entry into a Material Definitive Agreement |
On November 15, 2018, Michael Kors Holdings Limited (the “Company”) entered into a third amended and restated senior unsecured credit facility (the “2018 Credit Facility”) with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent, which replaced its existing 2017 senior unsecured revolving credit facility. The Company, a U.S. subsidiary of the Company, a Canadian subsidiary of the Company, a Dutch subsidiary of the Company and a Swiss subsidiary of the Company are the borrowers under the 2018 Credit Facility, and the borrowers and certain material subsidiaries of the Company provide unsecured guaranties of the 2018 Credit Facility. The 2018 Credit Facility provides for a $1.0 billion revolving credit facility (the “Revolving Credit Facility”), which may be denominated in U.S. Dollars and other currencies, including Euros, Canadian Dollars, Pounds Sterling, Japanese Yen and Swiss Francs. The Revolving Credit Facility also includessub-facilities for the issuance of letters of credit of up to $75 million and swing line loans of up to $75 million. The 2018 Credit Facility also provides for a $1.6 billion term loan facility (the “Term Loan Facility”), which is available and will be used to finance in part the cash purchase price for its acquisition of, directly and indirectly, 100% of the outstanding equity interests of Gianni Versace S.p.A., a company organized under the laws of Italy (“Versace”), including the acquisition of 100% of the outstanding equity interests of GIVI Holding S.p.A. (“GIVI”), which directly holds approximately 80% of the outstanding equity interests of Versace (the “Transaction”). The Term Loan Facility is divided into two tranches, an $800 million tranche that matures on the second anniversary of the initial borrowing of the term loans and an $800 million tranche that matures on the fifth anniversary of the initial borrowing of the term loans. The Revolving Credit Facility expires on November 15, 2023. The Company has the ability to expand its borrowing availability under the 2018 Credit Facility in the form of revolving commitments or term loans by up to an additional $500 million, subject to the agreement of the participating lenders and certain other customary conditions.
The loans under the Term Loan Facility, once borrowed, are required to be repaid on the last business day of March, June, September and December of each year, commencing with the first such day occurring after the last business day of the first full fiscal quarter to occur after the initial borrowing of term loans in installments equal to 2.50% of the aggregate original principal amount of the term loans.
Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at (i) for loans denominated in U.S. Dollars, an alternate base rate, which is the greatest of (x) the prime rate publicly announced from time to time by JPMorgan Chase, (y) the greater of the federal funds effective rate and the Federal Reserve Bank of New York overnight bank funding rate and zero, plus 50 basis points, and (z) the greater of theone-month London Interbank Offered Rate adjusted for statutory reserve requirements for Eurocurrency liabilities (“Adjusted LIBOR”) and zero, plus 100 basis points, in each case, plus an applicable margin based on the Company’s public debt ratings; (ii) for loans denominated other than in Canadian Dollars, the greater of Adjusted LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s public debt rating; (iii) for loans denominated in Canadian Dollars, the Canadian prime rate, which is the greater of the PRIMCAN Index rate and the rate applicable toone-month Canadian Dollar banker’s acceptances quoted on Reuters (“CDOR”), plus 100 basis points, plus an applicable margin based on the Company’s public debt ratings; or (iv) for loans denominated in Canadian Dollars, the average CDOR rate for the applicable interest period, plus 0.10% per annum, plus an applicable margin based on the Company’s public debt ratings.
Borrowings under the Term Loan Facility bear interest, at the Company’s option, at (i) the alternate base rate plus an applicable margin based on the Company’s public debt ratings; or (ii) the greater of Adjusted LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s public debt ratings.
The 2018 Credit Facility provides for an annual administration fee. The Revolving Credit Facility provides for a commitment fee equal to 0.10% to 0.25% per annum, based on the Company’s public debt ratings, applied to the average daily unused amount of the Revolving Credit Facility. The Term Loan Facility provides for a commitment fee equal to 0.10% to 0.25% per annum, based on the Company’s public debt ratings, applied to the undrawn amount of the Term Loan Facility, from January 6, 2019 until the term loans are fully drawn or the commitments under the Term Loan Facility terminate or expire.
Loans under the 2018 Credit Facility may be prepaid and commitments may be terminated or reduced by the borrowers without premium or penalty other than customary “breakage” costs with respect to loans bearing interest based upon Adjusted LIBOR or the CDOR rate.
The 2018 Credit Facility requires the Company to maintain a leverage ratio as of the end of each fiscal quarter of no greater than 3.75 to 1. Such leverage ratio is calculated as the ratio of the sum of total indebtedness as of the date of the measurement plus six times the consolidated rent expense for the last four consecutive fiscal quarters, to Consolidated EBITDAR (as defined below) for the last four consecutive fiscal quarters. Consolidated EBITDAR is defined as consolidated net income plus income tax expense, net interest expense, depreciation and amortization expense, consolidated rent expense and othernon-cash charges, subject to certain additions and deductions. The 2018 Credit Facility also includes covenants that limit additional indebtedness, guarantees, liens, acquisitions and other investments and cash dividends that are customary for financings of this type.
