| Item 1.01 | Entry into a Material Definitive Agreement. |
See the information set forth in Item 2.03, which is incorporated by reference herein.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
On October 27, 2021, Scholastic Corporation (the “Corporation”) and its principal operating subsidiary, Scholastic Inc., entered into an amended and restated 5-year credit agreement with a syndicate of banks and Bank of America, N.A., as administrative agent (the “Credit Agreement”). BOFA Securities, Inc., Truist Bank, and Wells Fargo Securities, LLC acted as joint lead arrangers and joint bookrunners.
The revised terms of the amended Credit Agreement include: (i) an increase in borrowing limits to $300 million from $250 million, as amended on December 16, 2020; (ii) the elimination of the required securitization of the Company’s inventory and accounts receivable; (iii) an unlimited basket for permitted payments of dividends and other distributions in respect of capital stock so long as the Corporation’s pro forma Consolidated Net Leverage Ratio, as defined, is not in excess of 2.75:1; (iv) the elimination of a minimum liquidity covenant; (v) the removal of an interest rate floor; and (vi) the extension of the maturity date to October 27, 2026.
The amended Credit Agreement provides for an unsecured revolving credit facility. Interest on borrowings under the facility may, at the Corporation’s election, be either a base rate (the higher of Bank of America’s prime rate, the Federal Funds Rate plus 0.5% per annum, or the Eurodollar Rate plus 1% per annum) or the Eurodollar Rate plus, in each case, an applicable margin. The applicable margin ranges from 0.35% per annum to 1.75% per annum depending upon the type of loan under consideration and the Corporation’s then prevailing Consolidated Leverage Ratio (as defined in the Credit Agreement). In addition, the Credit Agreement provides for payment of a commitment fee in respect of the aggregate unused amount of revolving credit commitments ranging from 0.20% per annum to 0.30% per annum based upon the Corporation’s then prevailing Consolidated Leverage Ratio. The financial terms disclosed in this paragraph are largely consistent with the financial terms of the Corporation’s previous credit agreement prior to its amendment in December 2020.
A portion of the revolving credit facility up to a maximum of $50 million is available for the issuance of letters of credit. In addition, a portion of the revolving credit facility up to a maximum of $15 million is available for swing line loans. The Credit Agreement has an accordion feature which permits the Corporation, provided certain conditions are satisfied, to increase the facility by up to an additional $150 million.
The Credit Agreement contains certain financial covenants related to leverage and interest coverage ratios (as defined in the Credit Agreement), limitations on the amount of dividends and other distributions, and other limitations on fundamental changes to the Corporation or its business. The Credit Agreement also provides for customary affirmative covenants (e.g., financial reporting etc.) and certain events of default, including payment defaults, covenant defaults and other customary defaults.
The foregoing description of the Credit Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Credit Agreement, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending November 30, 2021.
