Item 1.01 Entry into a Material Definitive Agreement.
On April 17, 2014, SUPERVALU INC. (the “Company”) entered into Amendment No. 1 (the “Amendment”) to the Amended and Restated Credit Agreement dated as of March 21, 2013 (the “Credit Agreement”), among the Company, as Borrower, the subsidiaries of the Company named as loan parties therein, Wells Fargo Bank, National Association, as Administrative Agent and Collateral Agent (the “Administrative Agent”), and the lenders parties thereto (collectively, the “Lenders”), pursuant to which the parties agreed to amend the Credit Agreement to reprice, amend and extend the Credit Agreement.
The Credit Agreement provides the Company and certain of its direct and indirect operating subsidiaries (the “Borrowers”) with the ability to borrow up to an aggregate principal amount of $1.0 billion under a senior secured revolving credit and letter of credit facility (the “Credit Facility”). The Amendment reduces the Credit Agreement’s interest rates to LIBOR plus 1.50 percent to 2.00 percent and prime plus 0.50 percent to 1.00 percent, depending on utilization. The Amendment also eliminates the springing maturity provision that would have accelerated the Credit Facility’s maturity to 90 days prior to May 1, 2016 if more than $250 million of the Company’s 8% senior notes remained outstanding as of that date. The springing maturity provision was replaced with a springing reserve provision that calls for a reserve to be placed against availability under the Credit Facility in the amount of any outstanding Material Indebtedness (as defined in the Credit Agreement) that is due within 30 days of the date the reserve is established. In addition, the Amendment also expands the ability to increase the Company’s $1.5 billion senior secured term loan facility (the “Term Loan Facility”), subject to a secured leverage test, by up to $500 million (previously $250 million), subject to identifying term loan lenders or other institutional lenders willing to provide the additional loans and the satisfaction of certain terms and conditions. The Amendment includes certain other non-material changes. Additionally, the Amendment extends the maturity date of the Credit Agreement to February 21, 2019 and contains modified covenants to give the Company additional strategic and operational flexibility.
The Credit Facility is guaranteed by certain of the Company’s existing and subsequently acquired or organized direct or indirect wholly owned domestic subsidiaries (the “Guarantors”, and together with the Borrowers, the “Loan Parties”). To secure their obligations under the Credit Facility, each of the Loan Parties has granted to the Administrative Agent a perfected first-priority security interest for the benefit of the Lenders in its present and future inventory, credit card, wholesale trade, pharmacy and certain other receivables, prescription files and related assets. In addition, the obligations of the Loan Parties under the Credit Agreement will be secured by second-priority liens on and security interests in the collateral securing the Term Loan Facility, subject to certain limitations to ensure compliance with the Company’s outstanding debt instruments and leases.
The revolving loans under the Credit Facility are subject to a borrowing base, the calculation of which is set forth in the Credit Agreement. The revolving loans under the Credit Facility may be voluntarily prepaid in certain minimum principal amounts, in whole or in part, without premium or penalty, subject to breakage or similar costs. The Borrowers are required to repay the revolving loans in cash and provide cash collateral under the Credit Facility to the extent that the revolving loans and letters of credit exceed the lesser of the borrowing base then in effect or the aggregate amount of the Lenders’ commitments under the Credit Facility (the “Aggregate Commitment”). However, in such an event, the Borrowers will not be required to cash collateralize the letter of credit obligations unless after the prepayment in full of the loans, the aggregate amount outstanding of letter of credit obligations exceeds the lesser of the borrowing base then in effect or the Aggregate Commitments.
In the event that the Company’s Excess Availability (as defined in the Credit Agreement) falls below certain thresholds, the Company will be obligated to apply all proceeds from collateral for the Credit Facility plus cash receipts not required to be applied to repay other debt to the repayment of the Credit Facility, subject to the ability to reborrow on the terms described in the Credit Agreement.
The Credit Agreement contains customary representations and warranties. The Credit Agreement also contains certain operating covenants, which restrict the ability of the Loan Parties to take certain actions without the permission of the Lenders or as otherwise permitted under the Credit Agreement. If Excess Availability is less than 10% of the Aggregate Commitments under the Credit Facility, the Credit Agreement also contains a financial covenant that requires that the consolidated fixed charge coverage ratio of the Company and its Restricted Subsidiaries (as defined in the Credit Agreement) will not be less than 1.00 to 1.00 for the Measurement Period (as defined in the Credit Agreement) ending as of the end of the most recent fiscal period for which the administrative agent has received financial statements.
The Credit Agreement contains customary default provisions. Among other things, an event of default will be deemed to have occurred upon (subject, in some cases, to certain grace periods as specifically set forth in the Credit Agreement): (i) the failure to pay any amounts due under the Credit Agreement, (ii) the breach of covenants, (iii) representations and warranties that are incorrect or
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