SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 1997
SILGAN HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware 000-22117 06-1269834
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
4 Landmark Square, Stamford, Connecticut 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 975-7110
Item 5. Other Events.
Refinancing of Bank Credit Facility
On July 29, 1997, Silgan Holdings Inc., a Delaware
corporation ("Silgan"), and its wholly owned subsidiaries, Silgan Containers
Corporation ("Containers") and Silgan Plastics Corporation ("Plastics"),
completed the refinancing of approximately $600 million of existing bank
indebtedness by entering into a new $1.0 billion senior secured credit facility
(the "New Credit Agreement") with various lenders from time to time party to the
New Credit Agreement (the "Banks"), Bankers Trust Company ("Bankers Trust"), as
Administrative Agent and as a Co-Arranger, Bank of America National Trust &
Savings Association, as Syndication Agent and as a Co-Arranger, Goldman Sachs
Credit Partners L.P., as Co-Documentation Agent and as a Co-Arranger, and Morgan
Stanley Senior Funding, Inc., as Co-Documentation Agent and as a Co-Arranger.
All amounts owing under Silgan's previous credit agreement, dated as of August
1, 1995 (as amended, the "Previous Credit Agreement"), were repaid with proceeds
from loans made under the New Credit Agreement, and the Previous Credit
Agreement and the various security documents entered into in connection
therewith were terminated.
This refinancing represents another step in Silgan's
previously announced strategy to refinance higher cost indebtedness in order to
improve cash flow and increase its operating and financial flexibility. The New
Credit Agreement lowers interest rates, increases the amount of borrowings
available, extends maturities and provides more flexibility to make
acquisitions, pay dividends, repurchase stock and refinance existing
indebtedness.
Description of New Credit Agreement
The following is a summary of certain terms of the New
Credit Agreement and certain other agreements entered into in connection
therewith and is qualified in its entirety by reference to the New Credit
Agreement and such other agreements, copies of which are filed as exhibits
hereto.
The Available Credit Facility. Pursuant to the New Credit
Agreement, the Banks (i) loaned to Silgan $250,000,000 of term loans designated
as "A Term Loans" and $200,000,000 of term loans designated as "B Term Loans"
and (ii) have agreed to lend to Containers, Plastics and certain other wholly
owned domestic subsidiaries of Silgan (collectively with Containers and
Plastics, the "Revolving Borrowers") up to $550,000,000 of revolving loans (the
"Revolving Loans"). The New Credit Agreement also gives Silgan the right to
request one or more Banks to increase its commitment for Revolving Loans by up
to an aggregate of an additional $200,000,000 without the consent of the other
Banks, with no Bank being obligated to so increase its commitment.
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Under the New Credit Agreement, the aggregate amount of
Revolving Loans which may be outstanding at any time is not subject to any
borrowing base limitation. However, the Revolving Borrowers are required to
maintain, for at least one period of 30 consecutive days during each period
beginning February 15 of each year through the following February 15, total
average unutilized commitments for Revolving Loans of at least $125 million.
Pursuant to the New Credit Agreement, proceeds from future
Revolving Loans may be used for general corporate and working capital purposes.
The New Credit Agreement increases Silgan's current borrowing capacity for
Revolving Loans by approximately $325 million. Silgan intends to use these
available funds to pursue its growth strategy through strategic acquisitions in
the metal food can, plastic bottle and closure businesses, and by acquiring
businesses in complementary areas of the North American consumer goods packaging
market. In addition, Silgan may use this additional borrowing capacity for other
purposes, including operating needs.
Each of the Term Loans and each of the Revolving Loans, at
the respective borrower's election, consists of loans designated as Eurodollar
Rate (as defined below) loans or as Base Rate (as defined below) loans. Each of
the Term Loans and each of the Revolving Loans can be converted from a Base Rate
loan into a Eurodollar Rate loan and vice versa. The interest periods for
Eurodollar Rate loans may be one, two, three, six or, to the extent available,
twelve months.
As of July 29, 1997, the outstanding principal amounts of
A Term Loans, B Term Loans and Revolving Loans under the New Credit Agreement
were $250 million, $200 million and $143.75 million, respectively. All such
proceeds were used to refinance amounts outstanding under the Previous Credit
Agreement and pay fees and expenses in connection therewith.
Security and Guarantees. Pursuant to the terms of a
Borrowers/Subsidiaries Guaranty made in favor of the Banks, Silgan and each of
its U.S. subsidiaries guaranteed on a secured basis all of the obligations of
the borrowers under the New Credit Agreement. Additionally, Silgan and each of
its U.S. subsidiaries pledged substantially all of their respective assets and
properties as collateral to secure the obligations under the New Credit
Agreement. In the event that Silgan receives a "senior unsecured implied" rating
with respect to its long-term indebtedness of at least BBB- from Standard &
Poor's Rating Services or at least Baa3 from Moody's Investors Service, Inc.,
Silgan has the right to require the release of all of the collateral pledged as
security for the New Credit Agreement.
Payment of Loans. The Revolving Loans generally can be
borrowed, repaid and reborrowed from time to time until December 31, 2003, on
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which date all Revolving Loans mature and are payable in full. Amounts repaid
under the Term Loans cannot be reborrowed.
The A Term Loans mature on December 31, 2003 and are
payable in installments as follows:
A Term Loan
Installment Repayment Date Principal Amount
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December 31, 1998..................................... $25,000,000
December 31, 1999..................................... 30,000,000
December 31, 2000..................................... 35,000,000
December 31, 2001..................................... 40,000,000
December 31, 2002..................................... 55,000,000
December 31, 2003..................................... 65,000,000
The B Term Loans mature on June 30, 2005 and are payable in
installments as follows:
B Term Loan
Installment Repayment Date Principal Amount
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December 31, 1997...................................... $ 1,000,000
December 31, 1998...................................... 2,000,000
December 31, 1999...................................... 2,000,000
December 31, 2000...................................... 2,000,000
December 31, 2001...................................... 2,000,000
December 31, 2002...................................... 2,000,000
December 31, 2003...................................... 2,000,000
December 31, 2004...................................... 2,000,000
June 30, 2005.......................................... 185,000,000
Under the New Credit Agreement, Silgan is required to repay Terms
Loans in an amount equal to (i) 50% of Silgan's Excess Cash Flow (as defined in
the New Credit Agreement) in any fiscal year during the New Credit Agreement
(beginning with the 1997 fiscal year) unless Silgan's Leverage Ratio (as defined
below) for such year is less than or equal to 3.50:1.00; (ii) 100% of the net
sale proceeds received from certain asset sales; provided that if the net sale
proceeds from such asset sales are less than $50 million, such proceeds may be
used by Silgan and its subsidiaries within 12 months to purchase assets for use
in their business; (iii) 100% of the net insurance proceeds from casualty or
condemnation events, provided that up to $25,000,000 of such proceeds may be
used within 12 months to replace or restore the damaged or lost properties or
assets; (iv) 100% of the net proceeds from the incurrence of indebtedness,
except generally for indebtedness incurred as permitted under the New Credit
Agreement; (v) 75% of the cash proceeds from sales of accounts receivable
pursuant to an asset securitization involving accounts receivable; and (vi) 75%
of the net sale proceeds in excess of the first $10 million in any fiscal year
from certain sale and leaseback transactions.
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Interest and Fees. Interest on the Term Loans and the Revolving
Loans is payable at certain margins over certain rates as summarized below.
Interest on Term Loans maintained as Base Rate loans accrues at
floating rates of 0.375% less the then applicable Interest Reduction Discount
(as defined below) (in the case of A Term Loans) and 0.875% less the then
applicable Interest Reduction Discount (in the case of B Term Loans) (but in any
case not less than zero) over the Base Rate. Interest on Term Loans maintained
as Eurodollar Rate loans accrues at floating rates of 1.375% less the then
applicable Interest Reduction Discount (in the case of A Term Loans) and 1.875%
less the then applicable Interest Reduction Discount (in the case of B Term
Loans) over a formula rate (the "Eurodollar Rate") determined with reference to
the rate offered by Bankers Trust for dollar deposits in the New York interbank
Eurodollar market. Interest on Revolving Loans maintained as (i) Base Rate loans
accrues at floating rates of 0.375% less the then applicable Interest Reduction
Discount (but in any case not less than zero) over the Base Rate or (ii)
Eurodollar Rate loans accrues at floating rates of 1.375% less the then
applicable Interest Reduction Discount over the Eurodollar Rate.
Initially, the margins over the Base Rate and the Eurodollar Rate
for Term Loans and Revolving Loans will be 150 basis points less than under the
Previous Credit Agreement. The interest rate for A Term Loans and Revolving
Loans is Base Rate or Eurodollar Rate plus 1% and for B Term Loans is Base Rate
plus 0.5% or Eurodollar Rate plus 1.5%. The interest rates will be reset
quarterly (beginning after December 31, 1997) to give effect to the then
applicable Interest Reduction Discount. Based upon current bank borrowings
outstanding, Silgan expects that the New Credit Agreement will provide an annual
reduction in interest expense of approximately $8.0 million.
Under the New Credit Agreement, the Revolving Borrowers have agreed
to pay to the Banks a commitment commission calculated initially as 0.25% per
annum on the daily average unused portion of the Banks' revolving commitment in
respect of the Revolving Loans until such revolving commitment is terminated.
The commitment commission rate is subject to change, ranging from 0.15% to
0.375%, on a quarterly basis (beginning after December 31, 1997) depending upon
Silgan's Leverage Ratio. Additionally, each of the Revolving Borrowers is
required to pay to the Banks, on a quarterly basis in arrears, a letter of
credit fee at a rate per annum of 1.375% less the then applicable Interest
Reduction Discount, and to pay to Bankers Trust a facing fee of 1/4 of 1% per
annum, each on the average daily stated amount of each letter of credit issued
for the account of such Revolving Borrower.
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In connection with the New Credit Agreement, the Banks (including
Bankers Trust) also received certain financing fees amounting to $2.3 million.
Certain Covenants. The New Credit Agreement contains numerous
financial and operating covenants, under which Silgan and its subsidiaries must
operate. The New Credit Agreement provides Silgan and its subsidiaries with more
flexibility than under the Previous Credit Agreement to, among other things,
make acquisitions, pay dividends, repurchase stock and refinance indebtedness.
The New Credit Agreement limits Silgan's and its subsidiaries'
abilities: (i) to create certain liens; (ii) to consolidate, merge, sell or
lease assets and to purchase assets, except that, among other things, (a) Silgan
and its subsidiaries generally may make stock or asset acquisitions of
businesses primarily engaged in the packaging business; and (b) Silgan and its
subsidiaries may sell up to an aggregate of $100,000,000 of assets and may enter
into certain sale and leaseback transactions, so long as, among other things,
the net proceeds therefrom are applied and/or reinvested as required by the New
Credit Agreement; (iii) to pay dividends on, or repurchase shares of, its
capital stock, except that, among other things: (a) Silgan may pay cash
dividends in an amount not to exceed $6,000,000 per year (as increased by
Silgan's Cumulative Consolidated Net Income (as defined in the New Credit
Agreement)), as provided in the New Credit Agreement; and (b) Silgan may redeem
or repurchase shares of its stock in an amount not to exceed $25,000,000 per
year (as increased by Silgan's Cumulative Consolidated Net Income), as provided
in the New Credit Agreement; (iv) to create additional indebtedness, except for,
among other things: (a) unsecured subordinated indebtedness of Silgan, the
proceeds of which are used within 60 days to refinance other existing
subordinated indebtedness of Silgan; (b) certain indebtedness assumed in
connection with permitted acquisitions; (c) certain unsecured guarantees of
obligations of Joint Ventures (as defined in the New Credit Agreement); and (d)
additional indebtedness not otherwise permitted in an amount not to exceed
$25,000,000; (v) to make certain advances, investments and loans, except for,
among other things, investments in, or transfers of assets to, Joint Ventures,
subject to certain limitations; (vi) to enter into certain transactions with
affiliates outside of the ordinary course; (vii) to make certain capital
expenditures, except for, among other things, capital expenditures which do not
exceed in the aggregate $50 million for the period from July 29, 1997 to
December 31, 1997 and $75 million for each calendar year thereafter during the
term of the New Credit Agreement (such amount for any given calendar year to be
increased by 7% of the annual sales attributable to any permitted acquisition),
provided that to the extent capital expenditures made during any period are less
than the amounts that are otherwise permitted to be made during such period,
such amount may be carried forward and utilized to make capital expenditures in
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the immediately succeeding calendar year, and provided further that additional
capital expenditures may be made with Net Equity Proceeds Amount, Net Insurance
Proceeds, Retained Excess Cash Flow Amount and Net Sale Proceeds (each as
defined in the New Credit Agreement) as provided in the New Credit Agreement;
(viii) with certain exceptions, to permit Silgan's direct and indirect
subsidiaries to issue capital stock or to create limitations on the ability of
any such subsidiary to (a) pay dividends or make other distributions, (b) make
loans or advances, or (c) transfer assets; (ix) to engage in any business other
than the packaging business; and (x) to designate any indebtedness as
"Designated Senior Indebtedness" for purposes of the 9% Debentures, the Exchange
Debentures or any refinancing indebtedness issued by Silgan.
The New Credit Agreement requires that the ratio of EBITDA (as
defined below) to Interest Expense (as defined below) may not be less than, for
each Test Period ending through December 31, 1998 (beginning with the Test
Period ending December 31, 1997), 2.25:1; for each Test Period ending from March
31, 1999 through December 31, 1999, 2.50:1; for each Test Period ending from
March 31, 2000 through December 31, 2000, 2.75:1; and for each Test Period
ending from and after March 31, 2001, 3.00:1. In addition, the New Credit
Agreement requires that the Leverage Ratio for any Test Period (beginning with
the Test Period ending December 31, 1997) not exceed, in the case of all Test
Periods ending on or before December 31, 1999, 4.50:1, and in the case of all
Test Periods ending on or after March 31, 2001, 4.00:1.
Events of Default. Events of default under the New Credit Agreement
include, among others: (i) the failure to pay any principal on the Term Loans or
the Revolving Loans, the failure to reimburse drawings under any letters of
credit when due or the failure to pay within three business days after the date
such payment is due interest on the Term Loans, the Revolving Loans or any
unpaid drawings under any letter of credit or any fees or other amounts owing
under the New Credit Agreement; (ii) subject to certain limited exceptions, any
failure to pay amounts due under certain other agreements or any defaults that
result in or permit the acceleration of certain other indebtedness; (iii)
subject to certain limited exceptions and any applicable grace periods, the
breach of any covenants, representations or warranties contained in the New
Credit Agreement or any related document; (iv) certain events of bankruptcy,
insolvency or dissolution; (v) the occurrence of certain judgments or decrees
not vacated, discharged, stayed or bonded pending appeal; (vi) the occurrence of
certain ERISA related liabilities; (vii) a default under or invalidity of any of
the security or guarantee documents entered into in connection with the New
Credit Agreement or of the security interests granted to the Banks pursuant to
the New Credit Agreement; and (viii) a Change of Control (as defined in the New
Credit Agreement).
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Upon the occurrence of any event of default under the New Credit
Agreement, the Banks are permitted, among other things, to accelerate the
maturity of the Term Loans and the Revolving Loans and all other outstanding
indebtedness under the New Credit Agreement and terminate their commitment to
make any further Revolving Loans or to issue any letters of credit.
Certain Definitions. For purposes of the foregoing description of
the New Credit Agreement, the following terms have the meanings indicated below:
"Base Rate" means, at any time, the highest of (i) 1/2 of 1% in
excess of an adjusted certificate of deposit rate as set forth in the New Credit
Agreement, (ii) 1/2 of 1% in excess of the Federal Funds Rate generally
determined on the basis of a weighted average of rates on overnight Federal
Funds transactions and (iii) the rate which Bankers Trust announces from time to
time as its prime lending rate.
"EBIT" means, for any period, the consolidated net income of Silgan
and its subsidiaries for such period, before Interest Expense and provision for
taxes and (to the extent not already otherwise excluded from the calculation
thereof under the New Credit Agreement) without giving effect to any
extraordinary non-cash gains or extraordinary non-cash losses and gains or
losses from sales of assets (other than sales of inventory in the ordinary
course of business), or any non-cash adjustments resulting from changes in value
of employee stock options.
"EBITDA" means, for any period, EBIT for such period, adjusted by
adding thereto the amount of all depreciation and all amortization of
intangibles (including covenants not to compete), goodwill and loan fees that
were deducted in arriving at EBIT for such period.
"Interest Expense" means, for any period, the total consolidated
interest expense of Silgan and its subsidiaries for such period (without giving
effect to any amortization or write-off of up-front fees and expenses in
connection with any debt issuance).
"Interest Reduction Discount" means initially .375%, and, from and
after Silgan's delivery to the Banks of financial statements for the fiscal
quarter ending December 31, 1997, (A) .125% if, but only if, the Leverage Ratio
for the current Test Period is less than 4.25:1 and greater than or equal to
4.00:1; (B) .250% if, but only if, the Leverage Ratio for the current Test
Period is less than 4.00:1 and greater than or equal to 3.75:1; (C) .375% if,
but only if, the Leverage Ratio for the current Test Period is less than 3.75:1
and greater than or equal to 3.50:1; (D) .500% if, but only if, the Leverage
Ratio for the current Test Period is less than 3.50:1 and greater than or equal
to 3.25:1; (E) .625% if, but only if, the Leverage Ratio for the current Test
Period is less than 3.25:1 and greater than or equal to 3.00:1; (F) .750% if,
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but only if, the Leverage Ratio for the current Test Period is less than 3.00:1
and greater than or equal to 2.75:1; (G) .875% if, but only if, the Leverage
Ratio for the current Test Period is less than 2.75:1 and greater than or equal
to 2.50:1; or (H) 1.00% if, but only if, the Leverage Ratio for the current Test
Period is less than 2.50:1. Notwithstanding anything to the contrary above in
this definition, the Interest Reduction Discount will be reduced to zero at all
times when a default or an event of default under the New Credit Agreement
exists.
"Leverage Ratio" means, for any period, the ratio of (x) the sum of
(I) total indebtedness (excluding Revolving Loans outstanding) as of the last
day of such period plus (II) the Revolving Loans outstanding on the December
31st immediately preceding the last day of such period (or, in the case of a
Test Period ended on December 31 in any fiscal year, the Revolving Loans
outstanding on such December 31) to (y) EBITDA for the most recently ended Test
Period. In determining the Leverage Ratio for any period, the unrestricted cash
and cash equivalents on the consolidated balance sheet of Silgan as of the last
day of such period of up to $50 million are subtracted from total indebtedness
to the extent, but only to the extent, no Revolving Loans are outstanding on
such day, except that for purposes of determining whether repayments are
required out of Excess Cash Flow for the fiscal year ending on December 31, 1997
only, up to $70,000,000 of unrestricted cash and cash equivalents may be
deducted in determining total indebtedness as of the last day of such year.
"Test Period" shall mean each period of four consecutive fiscal
quarters of Silgan (in each case taken as one accounting period).
For purposes of the various computations under the New Credit
Agreement, (i) all computations utilize accounting principles in conformity with
those used to prepare the statements of consolidated and consolidating financial
condition of Silgan and its subsidiaries at December 31, 1996 and March 31, 1997
and the related consolidated and consolidating statements of income and cash
flow of Silgan and its subsidiaries for the fiscal year and three-month periods
ended on such dates, (ii) all computations determining compliance with the ratio
of EBITDA to Interest Expense, the Leverage Ratio and the definitions of the
applicable commitment commission percentage and the Interest Reduction Discount
are determined on a Pro Forma Basis (as defined in the New Credit Agreement),
and (iii) in determining EBITDA for any period, no effect is given to certain
other matters as provided in the New Credit Agreement.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits
Exhibit No. Description
99.1 Credit Agreement, dated as of July 29, 1997, among
Silgan Holdings Inc., Silgan Containers
Corporation, Silgan Plastics Corporation, certain
other subsidiaries of any of them, various banks,
Bankers Trust Company, as Administrative Agent and
as a Co-Arranger, Bank of America National Trust &
Savings Association, as Syndication Agent and as a
Co-Arranger, Goldman Sachs Credit Partners L.P., as
Co-Documentation Agent and as a Co-Arranger, and
Morgan Stanley Senior Funding, Inc., as Co-
Documentation Agent and as a Co-Arranger.
99.2 Security Agreement, dated as of July 29, 1997,
among Silgan Holdings Inc., Silgan Containers
Corporation, Silgan Plastics Corporation, certain
other subsidiaries of any of them and Bankers Trust
Company, as Collateral Agent.
99.3 Pledge Agreement, dated as of July 29, 1997, made
by Silgan Holdings Inc., Silgan Containers
Corporation, Silgan Plastics Corporation,
California-Washington Can Corporation and SCCW Can
Corporation, as Pledgors, in favor of Bankers Trust
Company, as Collateral Agent and as Pledgee.
99.4 Borrowers/Subsidiaries Guaranty, dated as of July
29, 1997, made by Silgan Holdings Inc., Silgan
Containers Corporation, Silgan Plastics
Corporation, California-Washington Can Corporation
and SCCW Can Corporation.
In accordance with Item 601(b)(2) of Regulation S-K, the schedules,
exhibits and annexes referenced in the New Credit Agreement and in the Pledge
Agreement, the Security Agreement and the Borrowers/Subsidiaries Guaranty
referenced above have not been filed as part of the exhibits to this Form 8-K.
The Registrant agrees to furnish supplementally a copy of the omitted schedules,
exhibits and annexes to the Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SILGAN HOLDINGS INC.
By:/s/ Harley Rankin, Jr.
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Harley Rankin, Jr.
Executive Vice President,
Chief Financial Officer
and Treasurer
Date: August 7, 1997
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INDEX TO EXHIBITS
Exhibit No. Description
99.1 Credit Agreement, dated as of July 29, 1997, among
Silgan Holdings Inc., Silgan Containers
Corporation, Silgan Plastics Corporation, certain
other subsidiaries of any of them, various banks,
Bankers Trust Company, as Administrative Agent and
as a Co-Arranger, Bank of America National Trust &
Savings Association, as Syndication Agent and as a
Co-Arranger, Goldman Sachs Credit Partners L.P., as
Co-Documentation Agent and as a Co-Arranger, and
Morgan Stanley Senior Funding, Inc., as Co-
Documentation Agent and as a Co-Arranger.
99.2 Security Agreement, dated as of July 29, 1997,
among Silgan Holdings Inc., Silgan Containers
Corporation, Silgan Plastics Corporation, certain
other subsidiaries of any of them and Bankers Trust
Company, as Collateral Agent.
99.3 Pledge Agreement, dated as of July 29, 1997, made
by Silgan Holdings Inc., Silgan Containers
Corporation, Silgan Plastics Corporation,
California-Washington Can Corporation and SCCW Can
Corporation, as Pledgors, in favor of Bankers Trust
Company, as Collateral Agent and as Pledgee.
99.4 Borrowers/Subsidiaries Guaranty, dated as of July
29, 1997, made by Silgan Holdings Inc., Silgan
Containers Corporation, Silgan Plastics
Corporation, California-Washington Can Corporation
and SCCW Can Corporation.