| Item 1.01 | Entry into a Material Definitive Agreement. |
Term Loan Credit Agreement
On October 15, 2018, R. R. Donnelley & Sons Company (the “Company”), entered into a $550,000,000 senior secured term loan B credit facility pursuant to a Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, as borrower, the lenders party thereto (the “Term Loan Lenders”), and Bank of America, N.A., as administrative agent (in such capacity, the “Term Loan Administrative Agent”). Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A., PNC Capital Markets LLC and Wells Fargo Securities LLC acted asco-syndication agents for the Term Loan Credit Agreement.
Borrowings under the Term Loan Credit Agreement will bear interest, at the Company’s option, at eitherone-week,one-month,two-month, three-month orsix-month (or, if available to all the Term Loan Lenders, twelve-month or any period acceptable to the Term Loan Administrative Agent) LIBOR, plus either a margin of 5% or a base rate plus a margin of 4%. The proceeds of the loans under the Term Loan Credit Agreement will be used for, among other things, (i) repayment of certain debt outstanding under the Amended ABL Credit Agreement (as defined below), (ii) the consummation of the Tender Offers (as defined below) and (iii) the payment of fees and expenses in connection with the foregoing. The Term Loan Credit Agreement is scheduled to mature on January 15, 2024, at which time all amounts outstanding under the Term Loan Credit Agreement will be due and payable. Commencing on March 29, 2019, the Company will be required to make regularly scheduled amortization payments of $1,375,000 at the end each fiscal quarter until the maturity date.
The Company’s obligations under the Term Loan Credit Agreement are guaranteed by certain of its domestic subsidiaries (the “Guarantors”) and are secured by a security interest in substantially all of the assets of the Company and certain of its domestic subsidiaries (the “Collateral”). Collateral consisting of accounts receivable, inventory, equipment, money, deposit accounts, securities accounts, investment property, and, to the extent related to the foregoing, general intangibles, documents, instruments and chattel paper, as well as 65% of the equity interests of their first-tier foreign subsidiaries secures the obligations of the Company and the Guarantors under the Term Loan Credit Agreement and related guarantees on a second-priority basis (collectively the “ABL Priority Collateral”), and all other Collateral other than the ABL Priority Collateral (collectively, the “Term Loan Priority Collateral”) secures the obligations of the Company and the Guarantors under the Term Loan Credit Agreement and related guarantees on a first-priority basis, in each case, subject to permitted liens.
The Term Loan Credit Agreement contains customary affirmative and negative covenants for transactions of this type including negative covenants restricting, among other things, the Company’s ability to incur debt, make investments, make certain restricted payments (including payments on certain other debt), incur liens securing other debt, consummate certain fundamental transactions, enter into transactions with affiliates and consummate asset sales.
The Term Loan Credit Agreement contains customary events of default such as failure to pay obligations when due, defaults on certain other indebtedness, material breaches of representations and warranties, judgments in excess of $75,000,000 in the aggregate being rendered against the Company or its subsidiaries, the acquisition of 35% or more by any person or group of any outstanding class of capital stock having ordinary voting power in the election of directors of the Company, the incurrence of certain ERISA liabilities, and any collateral document ceasing to maintain the first priority lien contemplated thereby in an amount in excess of $20,000,000. Upon an event of default, the Term Loan Lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding and foreclose on the collateral. For certain events of default related to insolvency and receivership, the commitments of the Term Loan Lenders are automatically terminated and all outstanding obligations become immediately due and payable.
ABL Amendment
On October 15, 2018, the Company and the Guarantors entered into Amendment No. 1 to Credit Agreement (the “ABL Amendment”), with the lenders party thereto and Bank of America, N.A., as administrative agent (in such capacity, the “ABL Administrative Agent”), which amended that certain Amended and Restated Credit Agreement, dated as of September 29, 2017 (the “Existing ABL Credit Agreement” and, together with the ABL Amendment, the “Amended ABL Credit Agreement”), by and among the Company, as borrower, the Guarantors, as guarantors, the lenders party thereto and the ABL Administrative Agent.
