| Item 1.01 | Entry into a Material Definitive Agreement. |
On May 21, 2021, Donaldson Company, Inc. (the “Company”) entered into a Credit Agreement (the “Credit Agreement”), among the Company, the subsidiaries of the Company from time to time party thereto, certain lenders from time to time party thereto (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent for the Lenders and as an issuer of letters of credit. The Credit Agreement is a new five-year committed, unsecured, revolving credit facility in the amount of $500 million (subject to increase under the Credit Agreement by an amount not exceeding $250 million) which is available to the Company and certain of its subsidiaries. The credit facility includes a letter of credit facility in the amount of up to $25 million, the outstanding amounts of which decrease the available commitment. Upon closing of the Credit Agreement on May 21, 2021, the Credit Agreement replaced the Company’s previously existing $500 million unsecured, revolving credit facility, which would have expired in accordance with its terms on July 21, 2022. The amount outstanding under the facility as of May 21, 2021 was approximately $75 million.
The Company may elect the borrowings under the Credit Agreement to bear interest in different currencies and at different rates. Borrowings under the Credit Agreement may be made at an interest rate per annum equal to:
| | (1) | For a Eurocurrency Rate Loan (as defined in the Credit Agreement), the sum of (A) the Applicable Rate (as defined in the Credit Agreement, which is calculated based upon the Company’s debt-to-EBITDA ratio) and (B) the Eurocurrency Rate (as defined in the Credit Agreement), or |
| | (2) | For a Base Rate Loan (as defined in the Credit Agreement), the sum of (A) the Base Rate (which is a rate per annum equal to the greatest of (i) the interest rate announced by the administrative agent as its prime rate; (ii) the sum of 0.50% per annum and the federal funds rate in effect on such day, and (iii) the Adjusted Eurocurrency Rate (as defined in the Credit Agreement) for a period of one month plus 1.00%) in effect from time to time, and (B) the Applicable Rate, or |
| | (3) | For an RFR Loan (as defined in the Credit Agreement), the sum of (A) the RFR (as defined in the Credit Agreement, which is, for Sterling (as defined in the Credit Agreement), SONIA (as defined in the Credit Agreement) plus (B) the Applicable Rate. |
The Credit Agreement requires the Company to maintain a consolidated interest coverage ratio of not less than 3.5 and an adjusted debt-to-EBITDA ratio of not more than 3.5 (subject to temporary increase in connection with a Material Acquisition (as defined in the Credit Agreement)). If the Company is not in compliance with either of these requirements, the Lenders may terminate the commitment and/or declare any loan then outstanding be due.
The Credit Agreement contains certain other covenants, including a priority debt to consolidated net worth covenant and covenants relating to liens, indebtedness, asset sales, mergers, and investments, among others.
Amounts due under the Credit Agreement may be accelerated upon a Default (as defined in the Credit Agreement), such as a breach of a representation or covenant or the occurrence of bankruptcy, if not otherwise waived or cured.
Wells Fargo Bank, National Association and U.S. Bank National Association, as joint lead arrangers, and certain other Lenders have provided, from time to time, and may continue to provide, commercial banking, lending, investment, institutional trust, foreign exchange and other services to the Company, including letters of credit, depository and account processing services, for which the Company has paid and intends to pay customary fees.
The foregoing description of the Credit Agreement is not complete and is qualified in its entirety by reference to the Credit Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
On May 21, 2021, the Company entered into a Second Supplement to Note Purchase Agreement, dated May 21, 2021, with a group of institutional investors (the “Second Supplement”), which supplements a Note Purchase Agreement, dated March 27, 2014 (as amended by a First Amendment to the Note Purchase Agreement dated as of March 9, 2015, and as supplemented by the First Supplement to Note Purchase Agreement dated April 16, 2015, the “Note Purchase Agreement”). Pursuant to the Second Supplement and subject to satisfaction of certain closing conditions, the Company will issue and sell (a) $100 million aggregate principal amount of senior notes to be designated as its 2.50% Senior Notes, Series 2021-A, due August 5, 2031 (the “Series 2021-A Notes”) to certain institutional investors, on August 5, 2021 or on such other business day thereafter on or prior to August 10, 2021 as may be agreed upon by the Company and the purchasers of the Series 2021-A Notes, and (b) $50 million aggregate principal amount of senior notes to be designated as its 2.12% Senior Notes, Series 2021-B, due November 5, 2028 (the “Series 2021-B Notes”), to certain of the institutional investors, on November 5, 2021 or on such other business day thereafter on or prior to November 10, 2021 as may be agreed upon by the Company and the purchasers of the Series 2021-B Notes. The primary purpose of the issuance of the notes is to refinance existing indebtedness.
