| | Item 1.01 | Entry into a Material Definitive Agreement. |
As previously reported, Denali Intermediate Inc. (“Denali Intermediate”), Dell Inc. (“Dell”), Dell International L.L.C. (“Dell International”), and EMC Corporation (“EMC,” and together with Denali Intermediate, Dell, and Dell International, the “Credit Parties”), each a direct or indirect wholly-owned subsidiary of Dell Technologies Inc. (“Dell Technologies”), are party to a credit agreement (as amended, supplemented and otherwise modified from time to time, the “Senior Secured Credit Agreement”) dated as of September 7, 2016 with Credit Suisse AG, Cayman Islands Branch, as term loan B administrative agent and as collateral agent, JPMorgan Chase Bank, N.A., as term loan A / revolver administrative agent and swingline lender, and certain other financial institutions as agents, issuing banks and/or lenders, pursuant to which Dell International and EMC are the borrowers.
On December 20, 2018, the Credit Parties entered into a fourth amendment to the Senior Secured Credit Agreement (the “Fourth Amendment”) to (1) increase the aggregate revolving commitments available under the Senior Secured Credit Agreement by $1,170 million to $4,500 million, (2) obtain a new senior secured term loanA-4 facility consisting of an aggregate principal amount of $1,650 million termA-4 loans maturing on December 20, 2023 (the “TermA-4 Loans”) and (3) obtain a new senior secured term loanA-5 facility consisting of an aggregate principal amount of $5,000 million termA-5 loans, of which $2,016 million was drawn on December 21, 2018, after being reduced on a dollar for dollar basis by the net proceeds of the Term A-4 Loans and a margin loan, with an initial maturity date of the earlier of February 8, 2019 and the date on which the merger agreement in connection with the Class V Transaction (as defined in the Fourth Amendment) is terminated by Dell or any of its affiliates in accordance with its terms, subject to extension as described in the Fourth Amendment (the “TermA-5 Loans”). The aggregate principal amount of the TermA-5 Loans will be reduced on a dollar for dollar basis by the net proceeds of certain alternative financing. The TermA-4 Loans are subject to quarterly amortization payments in amounts set forth in the Fourth Amendment. The TermA-5 Loans have no amortization. Amounts outstanding under the TermA-4 Loans and TermA-5 Loans were drawn on December 20, 2018 and December 21, 2018, respectively.
The TermA-4 Loans will bear interest at LIBOR plus an applicable margin ranging from 1.25% to 2.00% or a base rate plus an applicable margin of 0.25% to 1.00%, in each case determined based on Dell’s public corporate credit rating from each of S&P and Moody’s in accordance with the pricing grid set forth in the Fourth Amendment. The TermA-5 Loans will bear interest at LIBOR plus an applicable margin of 1.75% or a base rate plus an applicable margin of 0.75%.
The borrowers will be required to prepay outstanding TermA-4 Loans and TermA-5 Loans, subject to certain exceptions, with a portion of certain excess cash flow, net cash proceeds of certainnon-ordinary course asset sales or other dispositions of property, and net cash proceeds of certain debt not permitted to be incurred under the term loan facilities, in each case on terms substantially similar to the terms applicable to the senior secured term loanA-2 facility under the second refinancing amendment. In addition, the borrowers may voluntarily repay outstanding TermA-4 Loans and TermA-5 Loans at any time without premium or penalty.
Except as described in the foregoing, the TermA-4 Loans and TermA-5 Loans have substantially the same terms as the senior secured term loanA-2 facility under the second refinancing amendment to the Senior Secured Credit Agreement, which is described in Item 1.01 of the Current Report on Form8-K filed on October 24, 2017 and was filed as Exhibit 10.1 thereto. The Senior Secured Credit Agreement contains customary events of default (including an event of default upon a change of control).
Proceeds from the TermA-4 Loans and TermA-5 Loans and proceeds from the margin loan financing in aggregate principal amount of $1,350 million, together with Dell Technologies’ pro rata portion of the special cash dividend to be paid by VMware, Inc. in connection with the Class V Transaction, and cash on hand at Dell Technologies and its subsidiaries, will be used to fund the aggregate cash consideration and the fees and expenses incurred in connection with the Class V Transaction. Any excess proceeds of the TermA-4 Loans are expected to be used for general corporate purposes. If the Class V Transaction is not completed, the borrowers intend to repay all outstanding TermA-4 Loans and TermA-5 Loans.
Certain of the lenders, agents, issuing banks and/or their affiliates have provided Dell Technologies and its affiliates with financial advisory, commercial banking and investment banking services.
