Item 1.01.
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Entry into a Material Definitive Agreement.
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On October 17, 2016, Casella Waste
Systems, Inc. (the Company) entered into a 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 and the Companys subsidiaries identified therein (the Credit Facility).
General
The
Credit Facility, under which the Company and its subsidiaries (subject to certain exceptions) are co-borrowers, provides for a new term loan B facility in the amount of $350 million (the Term Loan Facility) and a revolving credit
facility in the principal amount of up to $160 million, with a $60 million sublimit for letters of credit (the Revolving Credit Facility). Additional loans of up to the greater of $100.0 million (plus the amount of certain voluntary
prepayments) and an additional amount (subject to satisfaction of a consolidated secured net leverage ratio test of 4.00 to 1.00) 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 such other conditions as are reflected in the governing documents have been met, and subject to the receipt of commitments from Lenders for such additional amount.
On October 17, 2016, the Company borrowed the entire principal amount of the Term Loan Facility and $78.5 million under the Revolving Credit
Facility to be used to redeem of all of the Companys outstanding 7.75% Senior Subordinated Notes due 2019 (the Senior Subordinated Notes), repay in full the Companys existing Loan and Security Agreement dated as of
February 27, 2016 (the Prior Credit Facility), which matures on February 2020 (or November 2018 if the Senior Subordinated Notes are not refinanced by then), and pay transaction related fees and expenses.
Interest Rates
Amounts outstanding under the Credit Facility accrue interest, at the Companys option, at a rate per annum equal to either: (1) the
base rate, as defined in the Credit Facility, or (2) an adjusted LIBOR rate, as defined in the Credit Facility, in each case plus an applicable interest margin. The applicable interest margin will be determined based on the Companys net
leverage ratio, as defined in the Credit Facility, with the interest initially set at (i) with respect to the Term Loan Facility, 3.00% for adjusted LIBOR borrowings (with a 1.00% LIBOR floor) and 2.00% for base rate borrowings, and
(ii) with respect to the Revolving Facility, 3.00% for adjusted LIBOR borrowings and 2.00% 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.
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 Companys consolidated
net leverage ratio and will range from 0.250% to 0.500%. The initial commitment fee will be set at the rate of 0.375%. The Company will pay the revolving lenders a fee for letters of credit equal to the applicable interest margin for LIBOR 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.
Payments
The Credit Facility requires the Company to prepay outstanding loans, subject to certain exceptions, with:
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solely with respect to the Term Loan Facility, 50% (subject to reduction to 25% and 0% based upon the Companys consolidated secured net leverage ratio) of the Companys annual consolidated excess operating
cash flow (with certain deductions as set forth in the Credit Facility);
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100% of the net cash proceeds of certain asset sales, insurance recoveries and other recovery events where the proceeds exceed certain thresholds, and certain casualty and condemnation events, subject to reinvestment
rights and certain other exceptions; and
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100% of the net cash proceeds of any incurrence or issuance of certain debt, other than debt permitted under the Credit Facility.
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The Company may voluntarily prepay outstanding loans from time to time, subject to certain conditions, without premium or penalty other than
customary breakage costs with respect to LIBOR loans, provided, however, that if on or prior to the date that is six (6) months following the closing date, the Company prepays any loans under Term Loan Facility in connection with a
repricing transaction, the Company must pay a prepayment premium of 1.00% of the aggregate principal amount of the term loans so prepaid.
The Company is required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the term loans made on
the closing date, with the balance due at maturity.
Maturity
The Term Loan Facility matures October 17, 2023 and the Revolving Credit Facility is available until October 17, 2021, in each case, 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.
Security and Guarantees
All obligations under the Credit Facility are secured by a first priority security interest in substantially all of the Companys and the
co-borrowers existing and future assets (except as described below), including a pledge of the stock or other equity interests of the Companys domestic subsidiaries (subject to certain exclusions) and of any first tier foreign
subsidiaries, provided that not more than 65% of the voting stock of any such foreign subsidiaries shall be required to be pledged. As of the closing date, the Credit Facility is not required to be secured by any real property or any motor vehicles.
However, the Administrative Agent has the right at any time to require the Credit Facility to be secured by real property and/or motor vehicles.
Covenants
The
Credit Facility contains certain affirmative and negative covenants which, among other things and subject, in certain cases, to certain basket amounts and other exceptions, limit:
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the existence of additional indebtedness (including guarantees);
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the existence of liens or other encumbrances or pledges, or the granting of negative pledges;
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investments, loans and advances;
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mergers, consolidations, acquisitions and sales or other transfers of assets;
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the payment of dividends and distributions and repurchases of equity;
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prepayments of certain junior indebtedness, except in accordance with the terms of the Credit Facility;
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change in lines of business; and
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use of loan proceeds; and
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certain transactions with affiliates.
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The Credit Facility also requires, solely for the
benefit of the lenders under the Revolving Credit Facility, that the Company meet financial tests, including, without limitation:
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minimum consolidated EBITDA to consolidated cash interest charges ratio; and
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maximum consolidated funded debt (net of up to an agreed amount of cash and cash equivalents) to consolidated EBITDA ratio.
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Events of Default
The Credit Facility contains customary events of default, including, among other things:
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inaccuracy or breaches of representations and warranties;
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cross-defaults to certain other debt;
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events of bankruptcy and insolvency;
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impairment of security interests in collateral;
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a change of control, as defined in the Credit Facility;
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certain ERISA events; and
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failure of certain subordination provisions to be valid and enforceable.
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Waiver and
Modification
The terms of the Credit Facility may be waived or modified upon approval by the Company and the required percentage
of the applicable Lenders (including, in some cases, where applicable, all of the Lenders, the required percentage of Revolving Credit Facility Lenders, or only the affected Lenders).
The foregoing summary of the material terms of the Credit Facility and the transactions contemplated thereby are qualified in their entirely
by the complete text of the Credit Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference as if fully set forth herein.