| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant. |
On June 28, 2019 (the “Closing Date”), Constellation Brands, Inc. (the “Company” or “Constellation”) and Bank of America, N.A., as administrative agent, (the “Administrative Agent”) and lender (the “Lender”) entered into a term loan credit agreement (the “2019 Term Loan Credit Agreement”). See Item 8.01 which is incorporated herein by reference.
On June 28, 2019, Constellation Brands, Inc. and Bank of America, N.A., as administrative agent and lender, entered into the 2019 Term Loan Credit Agreement.
The 2019 Term Loan Credit Agreement provides for a $491,250,000 five-year term loan facility (the “2019 Five-Year Term Facility”).
The 2019 Five-Year Term Facility is subject to amortization payments of 5% per annum, with the balance due and payable on the fifth anniversary of the Closing Date (as defined in the 2019 Term Loan Credit Agreement). The 2019 Five-Year Term Facility will be repaid in quarterly payments of principal equal to 1.25% of the original aggregate principal amount of the 2019 Five-Year Term Facility, with the unpaid balance due and payable on the fifth anniversary of the Closing Date.
The rate of interest payable under the 2019 Term Loan Credit Agreement, at the Company’s option, will be equal to (i) LIBOR plus a margin, or (ii) the Base Rate plus a margin. The margin is adjustable based upon the Company’s Debt Rating, as defined in the 2019 Term Loan Credit Agreement. The margin with respect to the 2019 Five-Year Term Facility is between 0.75% and 1.375% for LIBOR borrowings and 0.00% and 0.375% for Base Rate borrowings. In certain circumstances where LIBOR cannot be adequately ascertained or available, the 2019 Term Loan Credit Agreement provides a mechanism to provide for the replacement of LIBOR with an alternative benchmark rate.
The obligations under the 2019 Term Loan Credit Agreement are guaranteed by certain subsidiaries of the Company (the “Guarantors”) pursuant to a guarantee agreement, dated as of June 28, 2019 (the “Guarantee Agreement”). The Guarantors under the 2019 Term Loan Credit Agreement are the same subsidiary guarantors as under the Company’s Eighth Amended and Restated Credit Agreement dated as of September 14, 2018, among the Company, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other parties thereto (the “Senior Credit Agreement”). Each of the Guarantors unconditionally and irrevocably guaranteed to the 2019 Term Loan Credit Agreement Administrative Agent, for the ratable benefit of the Lenders, the prompt and complete payment and performance of the indebtedness and other monetary obligations of the Company under the 2019 Term Loan Credit Agreement.
The 2019 Term Loan Credit Agreement sets forth certain representations and warranties of the Company to the Administrative Agent and the Lender. The Company and its subsidiaries are also subject to covenants that are contained in the 2019 Term Loan Credit Agreement, including those restricting the incurrence of additional indebtedness (including guarantees of indebtedness), additional liens, mergers and consolidations, transactions with affiliates, and sale and leaseback transactions, in each case subject to numerous conditions, exceptions and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio.
