| Item 1.01 | Entry Into a Material Definitive Agreement. |
Credit Facilities
On May 23, 2019, TAO Group Operating LLC (the “Senior Borrower”) and TAO Group Intermediate Holdings LLC (“Intermediate Holdings”), the parent of the Senior Borrower, entered into a credit agreement (the “Senior Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and a letter of credit issuer, and the lenders party thereto. Together the Senior Credit Agreement and the Subordinated Credit Agreement described in Item 8.01 below replace the Senior Borrower’s prior credit agreement dated January 31, 2017, which was terminated on May 23, 2019 in its entirety in accordance with its terms in connection with the repayment of all obligations thereunder from the proceeds of the Senior Credit Agreement and the Subordinated Credit Agreement.
The Madison Square Garden Company (the “Registrant”) indirectly owns a 62.5% interest in TAO GroupSub-Holdings LLC (the “Subordinated Borrower”), which is the indirect parent company of the Senior Borrower. The Registrant consolidates the Subordinated Borrower and its subsidiaries, including the Senior Borrower.
The Senior Credit Agreement provides the Senior Borrower at closing with senior secured credit facilities (the “Facilities”) consisting of: (a) an initial $40 million term loan facility (the “Term Loan Facility”) and (b) a $25 million revolving credit facility (the “Revolving Credit Facility”), each with a term of five years. The proceeds from the Facilities were used by the Senior Borrower to refinance amounts outstanding under the existing credit agreement. Up to $5 million of the Revolving Credit Facility is available for the issuance of letters of credit. All borrowings under the Revolving Credit Facility, including, without limitation, amounts drawn under the revolving line of credit are subject to the satisfaction of customary conditions, including absence of a default and accuracy of representations and warranties.
Interest Rates and Fees
Borrowings under the Senior Credit Agreement bear interest at a floating rate, which at the option of the Senior Borrower may be either (a) a base rate plus an additional rate ranging from 1.50% to 2.50% per annum (determined based on a total leverage ratio) (the “Base Rate”), or (b) a Eurocurrency rate plus an additional rate ranging from 2.50% to 3.50% per annum (determined based on a total leverage ratio) (the “Eurocurrency Rate”), provided that for the period following the closing date until the delivery of the compliance certificate for the fiscal quarter of Intermediate Holdings ending on or about June 30, 2019, the additional rate used in calculating the floating rate is (i) 1.50% per annum for borrowings bearing the Base Rate, and (ii) 2.50% per annum for borrowings bearing the Eurocurrency Rate. The Senior Credit Agreement requires the Senior Borrower to pay a commitment fee of 0.50% in respect of the daily unused commitments under the Revolving Credit Facility. The Senior Borrower is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the Senior Credit Agreement.
Guarantees and Security
All obligations under the Senior Credit Agreement are guaranteed by Intermediate Holdings and Intermediate Holding’s existing and future direct and indirect domestic subsidiaries (other than (i) the Senior Borrower, (ii) domestic subsidiaries substantially all of whose assets consist of controlled foreign corporations and (iii) subsidiaries designated as immaterial subsidiaries or unrestricted subsidiaries) (the “Subsidiary Guarantors”, and together with Intermediate Holdings, the “Guarantors”). All obligations under the Senior Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of the Senior Borrower and each Guarantor (collectively, “Collateral”), including, but not limited to, a pledge of the equity interests in the Senior Borrower held directly by Intermediate Holdings and the equity interests in each Subsidiary Guarantor held directly or indirectly by Intermediate Holdings.
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