Five Year Credit Agreement
On March 28, 2024, the Company also entered into a Revolving Credit Agreement (the “Five Year Credit Agreement,” and together with the Three Year Credit Agreement, the “Credit Agreements”) with Crédit Agricole as the Administrative Agent, the syndication agents, the documentation agents, the lead arrangers and bookrunners named therein, and the lenders named therein, providing the Company with a $1.5 billion senior unsecured revolving credit facility (the “Five Year Credit Facility,” and together with the Three Year Credit Facility, the “Credit Facilities”) for a five year term. The Company has the option to twice extend the five year term for one additional year, subject to satisfaction of customary conditions, for a maximum term of up to seven years. The Five Year Credit Facility contains the requirement that all borrowings must be paid within 364 days and also includes a required thirty day Clean-Up Period during each fiscal year of the Company, with the timing of each Clean-Up Period to be at the Company’s discretion. The Five Year Credit Facility also contains an accordion-type feature, which allows the Company to propose up to a $250 million increase in the lenders’ commitments. Proceeds of the Five Year Credit Facility will be used by the Company for working capital, capital expenditures and other general corporate purposes.
Borrowings under the Five Year Credit Facility will bear interest at a rate dependent on the Company’s credit ratings and based, at the Company’s election, on a defined base rate or on Term SOFR for the applicable interest period. In the case of borrowings based on the base rate, an applicable margin ranging from 0.000% to 0.250% will apply, based on the Company’s then-current credit ratings. The base rate is defined as the highest of (i) the per annum rate of interest established by Crédit Agricole as its prime lending rate at the time of such borrowing, (ii) the Federal Funds Rate, as in effect at the time of borrowing, plus one-half of one percent (0.50%) per annum, or (iii) one-month Term SOFR plus one percent (1.00%). In the case of borrowings based on Term SOFR, an applicable margin ranging from 0.750% to 1.250% will apply, based on the Company’s then-current credit ratings, plus a Term SOFR adjustment equal to 0.10%. The effective total interest rate may be modified in the event of a change in the Company’s credit ratings.
The Company must also pay commitment fees quarterly in arrears on the average daily unused portion of the credit facility at rates ranging from 0.060% to 0.175% per annum, dependent upon the Company’s credit ratings. Based upon the Company’s current credit ratings, the commitment fee would be at the rate of 0.100%.
The Five Year Credit Facility will expire on March 28, 2029, at which time all outstanding amounts under the Five Year Credit Facility will be due and payable. The Five Year Credit Facility contains usual and customary covenants for transactions of this type, in each case substantially similar to the Three Year Credit Facility. In addition, the Five Year Credit Facility provides that during the term of the facility, the Company’s debt to capitalization ratio as of the last day of each of its fiscal quarters shall be less than or equal to 0.70 to 1.00, excluding from the calculation of debt (i) any pension and other post-retirement benefits liability adjustments recorded in accordance with generally accepted accounting principles; and (ii) an amount of hybrid securities, as defined in the Five Year Credit Facility (generally, deferrable interest subordinated debt with a maturity of at least 20 years), not to exceed a total of 15% of total capitalization.
The Five Year Credit Facility includes events of default substantially similar to the Three Year Credit Facility, and includes rights and remedies of the lenders substantially similar to the Three Year Credit Facility.
With respect to the other parties to each Credit Facility, the Company also has or may have had customary banking relationships based on the provision of a variety of financial services, including cash management, investment banking, and equipment financing and leasing services, none of which are material individually or in the aggregate with respect to any individual party. The summary of each Credit Facility in this report does not purport to be complete and is qualified by reference to the full text of the Three Year Credit Agreement and the Five Year Credit Agreement, which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, and is incorporated herein by reference.
| Item 2.02. | Termination of a Material Definitive Agreement. |
On March 28, 2024, concurrently with the execution of the Credit Facilities described in Item 1.01 above, the Company terminated its $900 million senior unsecured revolving credit facility, dated March 31, 2021, which was due to expire on March 31, 2025, and terminated its $1.5 billion senior unsecured revolving credit facility, dated March 31, 2021, which was due to expire on March 31, 2027. The Company incurred no early termination penalties as a result of such terminations. With respect to the other parties to such terminated credit facilities, the Company has or may have had customary banking relationships based on the provision of a variety of financial services, including cash management, investment banking, and equipment financing and leasing services, none of which are material individually or in the aggregate with respect to any individual party.
