| Item 1.01 | Entry into a Material Definitive Agreement. |
On February 16, 2023, Jacobs Engineering Group Inc. (“JEGI”), a wholly-owned subsidiary of Jacobs Solutions Inc. (the “Company”), completed an offering of $500,000,000 aggregate principal amount of its 5.900% Sustainability-Linked Senior Notes due 2033 (the “Notes”). The Notes are fully and unconditionally guaranteed by the Company (the “Guarantee”). The Notes and the Guarantee were offered pursuant to a prospectus supplement, dated February 13, 2023, to the prospectus dated February 6, 2023, that forms a part of the Company and JEGI’s automatic shelf registration statement on Form S-3ASR (File Nos. 333-269605 and 333-269605-01) previously filed with the Securities and Exchange Commission.
The Notes and the Guarantee were issued pursuant to an indenture, dated as of February 16, 2023 (the “Base Indenture”), among JEGI, the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), as supplemented by the first supplemental indenture, dated February 16, 2023, among JEGI, the Company and the Trustee (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”).
Interest on the Notes is payable semi-annually in arrears on each March 1 and September 1, commencing on September 1, 2023, until maturity. The Notes will bear interest at 5.900% per annum (the “Initial Interest Rate”) and will mature on March 1, 2033. During fiscal year 2022, the Company entered into two treasury lock agreements with a total notional value of $500.0 million to manage its expected interest rate exposure in anticipation of issuing up to $500 million of fixed rate debt. The transaction effectively locked in an approximate fixed treasury benchmark interest rate of 2.72%. On February 13, 2023, the Company unwound these treasury lock agreements resulting in a net gain of $37.4 million, before tax, which will be amortized to interest expense over the term of the Notes. Taking into account this treasury lock, the effective annual interest rate associated with the Notes is 4.9956%.
From and including September 1, 2028 (the “First Step Up Date”), the interest rate payable on the Notes will be increased by an additional 12.5 basis points to 6.025% per annum (the “First Step Up Interest Rate”) unless the Company notifies the Trustee on or before the date that is 15 days prior to the First Step Up Date that the Percentage of Gender Diversity Performance Target (as defined in the First Supplemental Indenture) has been satisfied and receives a related assurance letter verifying such compliance. From and including September 1, 2030 (the “Second Step Up Date”) the interest rate payable on the Notes will be increased by 12.5 basis points to (x) 6.150% per annum if the First Step Up Interest Rate was in effect immediately prior to the Second Step Up Date or (y) 6.025% per annum if the Initial Interest Rate was in effect immediately prior to the Second Step Up Date, unless the Company notifies the Trustee on or before the date that is 15 days prior to the Second Step Up Date that the GHG Emissions Performance Target (as defined in the First Supplemental Indenture) has been satisfied and receives a related assurance letter verifying such compliance.
Prior to December 1, 2032 (the “Par Call Date”), JEGI may redeem the Notes at its option, in whole or in part, at any time and from time to time, at the redemption price calculated by JEGI (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of: (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed, assuming that such Notes matured on the Par Call Date, discounted to the redemption date on a semiannual basis (assuming a 360-day year of twelve 30-day months), at the Treasury Rate (as defined in the First Supplemental Indenture) plus 35 basis points, less (b) interest accrued to the redemption date, and (2) 100% of the principal amount of such Notes to be redeemed, plus, in either case, accrued and unpaid interest on the Notes, if any, to, but excluding, the redemption date.
At any time and from time to time on or after the Par Call Date, JEGI may redeem the Notes, at its option, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon, if any, to, but excluding, the redemption date.
The Notes are JEGI’s senior unsecured obligations and will rank equally in right of payment with all of JEGI’s existing and future senior unsecured indebtedness, rank senior in right of payment to all of JEGI’s future subordinated indebtedness and be subordinated to all of JEGI’s future secured indebtedness, if any, and liabilities of its subsidiaries. The Guarantee will be the Company���s senior unsecured obligation and will rank equally in right of payment with all of the Company’s existing and future senior unsecured indebtedness, rank senior in right of payment to all of the Company’s future subordinated indebtedness and be subordinated to all of the Company’s future secured indebtedness, if any, and liabilities of its subsidiaries.
The Base Indenture provides for the issuance of senior debt securities and related guarantees by either of the Company or JEGI from time to time. The Indenture contains covenants that limit the Company and JEGI’s ability to, among other things, incur certain indebtedness secured by liens, engage in certain sale and leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all of their respective assets.
