Item 1.01.
Entry into a Material Definitive Agreement.
On May 17, 2017 (such date, the “
Closing Date
”), Ashland LLC, a Kentucky limited liability company (the “
Company
”) and an indirect subsidiary of Ashland Global Holdings Inc., a Delaware corporation (“
Ashland
”), entered into a Credit Agreement (the “
Credit Agreement
”) among the Company, as Borrower, The Bank of Nova Scotia, as Administrative Agent, each lender and letter of credit issuer party thereto and the other agents party thereto. The Credit Agreement provides for (i) a $250 million three-year term loan A facility (the “
Three-Year TLA Facility
”), (ii) a $250 million five-year term loan A facility (the “
Five-Year TLA Facility
” and together with the Three-Year TLA Facility, the “
TLA Facilities
”) and (iii) a $680 million five-year revolving credit facility (including a $125 million letter of credit sublimit) (the “
Revolving Facility
” and together with the TLA Facilities, the “
Credit Facilities
”). Proceeds of borrowings under the TLA Facilities were used on the Closing Date solely to finance the acquisition of the shares of Pharmachem Laboratories, Inc., a privately-held New Jersey corporation (“
Pharmachem
”), and the proceeds of the Revolving Facility were used on the Closing Date to finance, in part, the Acquisition (as defined below) and to refinance the Company’s existing credit agreement dated as of June 23, 2015 (the “
Existing Credit Agreement
”). After the Closing Date, proceeds of borrowings under the Revolving Facility will be used, among other things, to provide ongoing working capital and for other general corporate purposes.
The Company expects, within 30 days after the Closing Date, to increase the aggregate commitments under the Revolving Facility from $680 million to $800 million pursuant to the incremental facility provisions of the Credit Agreement.
On the Closing Date, commitments under the Existing Credit Agreement were terminated.
The Credit Agreement permits the assignment of the Company’s obligations under the TLA Facilities to either Ashland Specialties Holding C.V. or Ash Global Holdings Two B.V., as the Company may elect (such entity as so elected, “
Ashland Netherlands
”). The Credit Facilities are guaranteed by Ashland, Ashland Chemco Inc. (a direct subsidiary of Ashland and a parent of the Company), and the Company
’
s existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special purpose financing subsidiaries, regulated subsidiaries, foreign subsidiaries and certain other subsidiaries) and, solely with respect to the TLA Facilities following the assignment thereof to Ashland Netherlands, by the Company, and are secured by a first-priority security interest in substantially all the personal property assets of the Company and the guarantors, including all or a portion of the equity interests of certain of the Company
’
s domestic subsidiaries and first-tier foreign subsidiaries and, in certain cases, a portion of the equity interests of other foreign subsidiaries. The guarantees of the Credit Facilities by the Company’s subsidiaries and pledge of security interests by such guarantors may, at the Company’s option, be released upon and during the occurrence of a Collateral Release Event (as defined in the Credit Agreement).
At the Company
’
s option, loans issued under the Credit Agreement will bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. Loans will initially bear interest at LIBOR plus 1.75% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.75%, in the alternative, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between LIBOR plus 1.375% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.500% annum), based upon the Company’s secured facilities ratings or the Consolidated Net Leverage Ratio (as defined in the Credit Agreement) (whichever yields a lower applicable interest rate margin) at such time. In addition, the Company will initially be required to pay fees of 0.25% per annum on the daily unused amount of the Revolving Facility through and including the date of delivery of a compliance certificate, and thereafter the fee rate will fluctuate between 0.175% and 0.40% per annum, based upon the Company
’
s secured facilities rating or the Consolidated Net Leverage Ratio (whichever yields a lower applicable rate).
The Credit Facilities may be prepaid at any time without premium. The Three-Year TLA Facility will not amortize and will be due on the date that is three years after the Closing Date. The Five-Year TLA Facility will not amortize in each of the first, second and third years after the Closing Date and will amortize at a rate of 20% per annum in each of the fourth and fifth years after the Closing Date (payable in equal quarterly installments), with the outstanding balance of the Five-Year TLA Facility to be paid on the date that is five years after the Closing Date.
The Credit Agreement contains usual and customary representations and warranties, and usual and customary affirmative and negative covenants, including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants (including maintenance of a maximum Consolidated Net Leverage Ratio and a minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement)). The Credit Agreement also contains usual and customary events of default, including non-payment of principal, interest, fees and other amounts, material breach of a representation or warranty, non-performance of covenants and obligations, default on other material debt, bankruptcy or insolvency, material judgments, incurrence of certain material ERISA liabilities, impairment of loan documentation or security and change of control.
A copy of the Credit Agreement is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. The above description of the Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Credit Agreement filed with this Current Report on Form 8-K.