| ITEM 1.01 | Entry into a Material Definitive Agreement. |
On January 29, 2021, AT&T Inc. (the “Company”) entered into a $14.7 billion Term Loan Credit Agreement (the “Term Loan”), with Bank of America, N.A., as agent. The Term Loan is available for a single draw at any time before May 29, 2021. The proceeds of the Term Loan will be used for general corporate purposes of the Borrower and its Subsidiaries, which may include among other things, financing acquisitions of additional spectrum.
Advances will bear interest, at the Company’s option, either:
| | • | | at a variable annual rate (“Base Rate”) equal to: (1) the highest of (but not less than zero) (a) the prime rate quoted by The Wall Street Journal, (b) 0.5% per annum above the federal funds rate, and (c) the London interbank offered rate (or the successor thereto) (“LIBOR”) applicable to dollars for a period of one month plus 1.00%, plus (2) an applicable margin, as set forth in the Term Loan (the “Applicable Margin for Base Rate Advances”); or |
| | • | | at a rate (“Eurodollar Rate”) equal to: (i) LIBOR (adjusted upwards to reflect any bank reserve costs) for a period of one, two, three or six months, as applicable, plus (ii) an applicable margin, as set forth in the Term Loan (the “Applicable Margin for Eurodollar Rate Advances”). |
The Term Loan is not subject to amortization and the entire principal amount of the Term Loan will be due and payable 364 days after the date on which the borrowing is made.
The Applicable Margin for Eurodollar Rate Advances under the Term Loan will be equal to 0.625%, 0.875%, 1.000% or 1.125% per annum depending on the Company’s senior unsecured long-term debt ratings. The Applicable Margin for Base Rate Advances will be equal to the greater of (x) 0.00% and (y) the relevant Applicable Margin for Eurodollar Rate Advances minus 1.00% per annum, depending on the Company’s senior unsecured long-term debt ratings.
Commencing March 30, 2021, the Company will also pay a fee of 0.070%, 0.080%, 0.100% or 0.125% per annum of the amount of unused lender commitments (the “Commitment Fee”), depending on the Company’s senior unsecured long-term debt ratings.
In the event that the Company’s unsecured long-term debt ratings are split by S&P, Moody’s and Fitch, then the Applicable Margin for Eurodollar Rate Advances, the Applicable Margin for Base Rate Advances and the Commitment Fee, as the case may be, will be determined by the highest of the three ratings, except that in the event the lowest of such ratings is more than one level below the highest of such ratings, then the Applicable Margin for Eurodollar Rate Advances, the Applicable Margin for Base Rate Advances and the Commitment Fee, as the case may be, will be determined based on the level that is one level above the lowest of such ratings.
The Term Loan contains certain representations and warranties and covenants, including a limitation on liens covenant and, beginning in the first full fiscal quarter ending after the closing date (i.e., the fiscal quarter ending June 30, 2021), a net debt-to-EBITDA financial ratio covenant that the Company will maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.5 to 1 of:
| | (A) | all items that would be treated under accounting principles generally accepted in the United States (“GAAP”) as specified in the Term Loan as indebtedness on the Company’s consolidated balance sheet minus the amount by which the sum of (i) 100% of unrestricted cash and cash equivalents held by the Company and its subsidiaries in the United States, and funds available on demand by the Company and its subsidiaries in the United States (including but not limited to time deposits), and (ii) 65% of unrestricted cash and cash equivalents held by the Company and its subsidiaries outside of the United States, exceeds $2 billion in the aggregate (or the avoidance of doubt, any cash and cash equivalents held by the Company and its subsidiaries outside of the United States shall not be considered “restricted” solely as a result of the repatriation of such cash and cash equivalents being subject to any legal limitation or otherwise resulting in adverse tax consequences to the Company), to |
| | (B) | the net income of the Company and its consolidated subsidiaries, determined on a consolidated basis for the four quarters then ended in accordance with GAAP, adjusted to exclude the effects of (a) gains or losses from discontinued operations, (b) any extraordinary or other non-recurring non-cash gains or losses (including non-cash restructuring charges), (c) accounting changes including any changes to Accounting Standards Codification 715 (or any subsequently adopted standards relating to pension and postretirement benefits) adopted by the Financial Accounting Standards Board after the date of the Term Loan, (d) interest expense, (e) income tax expense or benefit, (f) depreciation, amortization and other non-cash charges (including actuarial gains or losses from pension and postretirement plans), (g) interest income, (h) equity income and losses and (i) other non-operating income or expense. In the event the Company makes a Material Acquisition or a Material Disposition (each as defined in the Term Loan) during the relevant four quarter period, pro forma effect will be given to such material acquisition or material disposition, as if such material acquisition or material disposition occurred on the first day of such period. |
Events of default under the Term Loan, which, if occurring after the advances are made, would result in the acceleration of or permit the lenders to accelerate, as applicable, required payment and which would increase the Base Rate and the Eurodollar Rate by 2.00% per annum, whether automatically or upon the request of the requisite lenders, as applicable, include the following:
| | • | | Failure to pay principal or interest, fees or other amounts under the Term Loan beyond any applicable grace period; |
