| Item 1.01 | Entry into a Material Definitive Agreement. |
On September 27, 2024, Casella Waste Systems, Inc. (the “Company”) entered into a Second Amended and Restated Credit Agreement by and among Bank of America, N.A., as administrative agent (“Administrative Agent”), Bank of America, N.A., as lender, and the other lenders party thereto (collectively, the “Lenders”), the Company, the Company’s subsidiaries identified therein and the other parties thereto (the “Credit Facility”), which amends and restates in its entirety the Company’s Amended and Restated Credit Agreement, dated as of December 21, 2021 (the “Existing Credit Agreement”). Proceeds of the Credit Facility refinanced the Company’s term loans under the Existing Credit Agreement, and may be used for working capital, permitted acquisitions, investments and dividends and distributions, and for other general corporate purposes.
General
The Credit Facility, under which the Company and its subsidiaries (subject to certain exceptions) are co-borrowers, provides for a term loan A facility in the principal amount of $800.0 million (the “Term Loan Facility”) and a revolving credit facility in the principal amount of up to $700.0 million, with a $155.0 million sublimit for letters of credit (the “Revolving Credit Facility”). Additional loans of up to the greater of $200.0 million (plus the amount of certain voluntary prepayments) and an additional amount (subject to the satisfaction of the applicable consolidated total net leverage ratio or consolidated secured net leverage ratio test) may be made available under the Credit Facility upon request of the Company, provided that the Company is not in default at the time of increase and other conditions as are reflected in the governing documents have been met, and subject to the receipt of commitments from, and agreement upon the terms and conditions of such additional loans with, Lenders for such additional amount.
Interest Rates
Amounts outstanding under the Credit Facility accrue interest, at the Company’s option, at a rate per annum equal to either: (1) the base rate, as defined in the Credit Facility or (2) the term secured overnight financing rate (“Term SOFR”), in each case plus an applicable interest margin. The applicable interest margin will be determined based on the Company’s consolidated total net leverage ratio, as defined in the Credit Facility, with the interest margin initially set at 1.925% for Term SOFR loans and 0.925% for base rate borrowings. The interest rate otherwise payable under the Credit Facility will be subject to increase by 2.00% per annum during the continuance of a payment default and may be subject to increase by 2.00% per annum during the continuance of any other event of default. The Credit Facility contains customary benchmark replacement provisions pursuant to which, upon certain triggering events, the SOFR benchmark used to calculate the Term SOFR rate will be replaced with a successor rate, on the terms and conditions in the Credit Facility. Further, commencing in the fiscal year ending December 31, 2024 until the date specified in the Credit Facility, the interest rate margin applied for drawn and undrawn amounts under the Credit Facility shall be separately adjusted based on the Company’s achievement of certain thresholds and targets on two sustainability related key performance indicator metrics during the fiscal year ended December 31, 2023 (“fiscal year 2023”): i) metric tons of solid waste materials reduced, reused or recycled through our direct operations or with third-parties in collaboration with customers; and ii) our total recordable incident rate.
Fees and Expenses
Certain customary fees and expenses are payable to the Lenders and the Administrative Agent under the Credit Facility, including a commitment fee on the unused portion of the Revolving Credit Facility that will be based on the Company’s consolidated net leverage ratio and will range from 0.200% to 0.400%. The initial commitment fee will be set at the rate of 0.300%. The Company will pay the revolving lenders a fee for letters of credit equal to the applicable interest margin for Term SOFR loans under the Revolving Credit Facility, subject to increase by 2.00% per annum during the continuance of an event of default. The Company will also pay each issuing bank of any letter of credit a fronting fee equal to 0.250% per annum on the face amount of each letter of credit, plus customary issuance, administrative and other fees and costs.
Amortization Payments on Term Loan
The Company is required to make scheduled quarterly payments on the term loan on the last business day of each March, June, September and December, commencing on the last business day of the fiscal quarter ending March 31, 2027, equal to (i) 0.25% of the initial aggregate stated principal amount of the term loans on the closing date, in the case of installments occurring on or before the last business day of the fiscal quarter ending December 31, 2027, and (ii) 0.625% of the initial aggregate stated principal amount of the term loans on the closing date, in the case of any installments occurring thereafter, with the balance due on the maturity date.
Maturity
The Credit Facility matures on September 27, 2029, subject to any extensions in accordance with the Credit Facility, at which time the applicable loans will become due and payable in full and the revolving commitments will terminate.
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