Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
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The information set forth under Introductory Note of this Current Report on Form 8-K related to the Companys revolving credit
facility is incorporated herein by reference.
HFOTCO is a party to a Credit Agreement (as supplemented or modified prior to June 14,
2017, the
Existing HFTOCO Credit Agreement
), dated as of August 19, 2014, by and among BGCT, as the parent, HFOTCO, as the borrower, Morgan Stanley Senior Funding, Inc. (
MSSF
), as administrative agent, Bank
of America, N.A., as collateral agent, and the lenders party thereto. In connection with the Closing, the Existing HFOTCO Credit Agreement was modified pursuant to that certain Consent and Amendment No. 1 to Credit Agreement (the
HFOTCO Credit Agreement Amendment
; the Existing Credit Agreement, as modified by the HFOTCO Credit Agreement Amendment, the
HFOTCO Credit Agreement
), dated as of June 14, 2017 and effective as of the
Closing Date, by and among BGCT, as the parent, HFOTCO, as the borrower, MSSF and certain lenders.
Under the terms of the HFOTCO Credit
Agreement, HFOTCO issued $550 million of senior secured term loans (the
HFOTCO Term Loans
) and obtained senior secured revolving commitments of $75 million (the
HFOTCO Revolving Commitments
and any outstanding
senior secured revolving loans, the
HFOTCO Revolving Loans
). The HFOTCO Revolving Commitments and any outstanding HFOTCO Revolving Loans mature on August 19, 2019. HFOTCO is required to repay the outstanding HFOTCO Term Loans
in quarterly amounts equal to 0.25% of the initial amount of the HFOTCO Term Loans, and all outstanding HFOTCO Term Loans mature on August 19, 2021. In addition, under the HFOTCO Credit Agreement, HFOTCO may request an increase of up to an
additional $25 million of incremental revolving commitments or the incurrence of up to an additional $100 million of incremental term loans, in each case plus such amount such that, on a pro forma basis after giving effect to the incurrence thereof
(assuming that all incremental revolving commitments are fully drawn for purposes of calculation), the total net adjusted leverage ratio would not exceed 5.00 to 1.00. HFOTCO may request such incremental revolving commitments or incremental term
loans from existing lenders or new lenders under the HFOTCO Credit Agreement. As of the Closing Date, $534.88 million of HFOTCO Term Loans were outstanding.
At HFOTCOs option, the HFOTCO Term Loans and outstanding HFOTCO Revolving Loans will bear interest at either the Eurodollar rate or an
alternate base rate (
ABR
) plus, in each case, an applicable margin. After the Closing Date, the applicable margin relating to any HFOTCO Term Loan and HFOTCO Revolving Loan that is a Eurodollar rate loan is 3.50% and 3.25%,
respectively, per annum, and the applicable margin relating to any HFOTCO Term Loan and HFOTCO Revolving Loan that is a ABR rate loan is 2.50% and 2.25%, respectively, per annum.
The HFOTCO Credit Agreement includes customary representations and warranties and affirmative and
negative covenants, which were made only for the purposes of the HFOTCO Credit Agreement and as of the specific date (or dates) set forth therein, and may be subject to certain limitations as agreed upon by the contracting parties, and apply only to
BGCT, HFOTCO and any subsidiaries of HFOTCO party to the HFOTCO Credit Agreement. Such limitations include the creation of new liens, indebtedness, making of certain restricted payments and payments on indebtedness, making certain dispositions,
making material changes in business activities, making fundamental changes including liquidations, mergers or consolidations, making certain investments, entering into certain transactions with affiliates, making amendments to material agreements,
modifying the fiscal year, dealing with hazardous materials in certain ways, entering into certain hedging arrangements, entering into certain restrictive agreements, and funding or engaging in sanctioned activities.
In addition, the HFOTCO Credit Agreement contains a financial performance covenant as follows (the
HFOTCO Financial
Covenant
): if the aggregate revolving exposure exceeds 25% of the HFOTCO Revolving Commitments, the total adjusted net leverage ratio of BGCT and its restricted subsidiaries under the HFOTCO Credit Agreement may not exceed 7.50 to 1.00 as
of the last day of any fiscal quarter. The financial performance covenant is solely for the benefit of the lenders holding HFOTCO Revolving Commitments or HFOTCO Revolving Loans.
The HFOTCO Credit Agreement includes customary events of default, including events of default relating inaccuracy of representations and
warranties in any material respect when made or when deemed made, non-payment of principal and other amounts owing under the HFOTCO Credit Agreement, including in respect of letter of credit disbursement obligations, violation of covenants, cross
acceleration to any material indebtedness of BGCT, HFOTCO and its subsidiaries, bankruptcy and insolvency events, certain unsatisfied judgments, certain ERISA events, certain invalidities of loan documents and the occurrence of a change of control
(excluding the change of control occurring on the Closing Date). A default of the HFOTCO Financial Covenant will not constitute an event of default unless lenders holding a majority of the HFOTCO Revolving Commitments and HFOTCO Revolving Loans
request that the administrative agent accelerate the maturity of the outstanding HFOTCO Revolving Loans due to a breach of the HFOTCO Financial Covenant. A default under the HFOTCO Credit Agreement would permit the participating banks to terminate
commitments, require immediate repayment of any outstanding loans with interest and any unpaid accrued fees, require the cash collateralization of outstanding letter of credit obligations, and subject to intercreditor arrangements with the holders
of the IKE Bonds referred to below, exercise other rights and remedies.
The HFOTCO Credit Agreement is guaranteed by BGCT and any future
material domestic subsidiary of HFOTCO, and secured by a lien on substantially all of the property and assets of HFOTCO and the other loan parties, subject to customary exceptions and subject to intercreditor arrangements with the holders of the IKE
Bonds referred to below.
The foregoing description is qualified in its entirety by reference to the full text of the Existing HFOTCO
Credit Agreement, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated in this Item 2.03 by reference and by reference to the full text of the HFOTCO Credit Agreement Amendment, a copy of which is
filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated in this Item 2.03 by reference.
In 2010, 2011 and 2012,
HFOTCO completed the issuance of $75 million, $50 million and $100 million, respectively, of limited obligation revenue bonds due November 1, 2050 (the
IKE Bonds
). The IKE Bonds were issued by the Harris County Industrial
Development Corporation, a non-profit corporation organized with the approval of Harris County, Texas, and existing pursuant to the Development Corporation Act, Chapter 501, Texas Local Government Code (
HCIDC
), under
Section 704, Heartland Disaster Relief Act of 2008.
In connection with the issuance of the IKE Bonds, HFOTCO is party to (i) a
Loan Agreement, dated November 1, 2010, between HFOTCO, as borrower, and HCIDC (the
Original 2010 Loan Agreement
and, as amended by the First Amendment to Loan Agreement (Series 2010), dated August 19, 2014 (the
First Amendment to 2010 Loan Agreement
), the
2010 Loan Agreement
), (ii) a Loan Agreement, dated December 1, 2011, between HFOTCO, as borrower, and HCIDC (the
Original 2011 Loan
Agreement
and, as amended by the First Amendment to Loan Agreement (Series 2011), dated August 19, 2014 (the
First Amendment to 2011 Loan Agreement
), the
2011 Loan Agreement
) and (iii) a Loan
Agreement, dated October 1, 2012, between HFOTCO, as borrower, and HCIDC (the
Original 2012 Loan Agreement
and, as amended by the First Amendment to Loan Agreement (Series 2012), dated August 19, 2014 (the
First
Amendment to 2012 Loan Agreement
), the
2012 Loan Agreement
; the 2012 Loan Agreement, together with the 2011 Loan Agreement and the 2010 Loan Agreement, the
HCIDC Loan Agreements
). HFOTCO used the
proceeds of the IKE Bonds loaned to HFOTCO by HCIDC pursuant to the HCIDC Loan Agreements to finance projects in Hurricane Ike disaster areas designated by the Internal Revenue Service and the IKE Bonds were designated by the Governor of Texas as
qualified Hurricane Ike disaster area bonds.
Pursuant to the terms of the HCIDC Loan Agreements, HFOTCO is obligated to make
loan payments to the trustees party to the IKE Bond Indentures (referred to below) for the benefit of HCIDC equal to principal of and interest on the IKE Bonds when due, including upon acceleration. The rate of interest is determined to
August 19, 2019 at 3-month LIBOR plus the Applicable Spread, which is defined in the Continuing Covenant Agreement (as referred to below), and ranges from 1.25% to 1.65%, based on reference to a super senior leverage based pricing grid.
In connection with the issuance of the IKE Bonds, HCIDC has entered into (i) the Amended and Restated Bond Indenture (the
Series
2010 Indenture
), dated as of August 19, 2014, between HCIDC and The Bank of New York Mellon Trust Company, National Association, as trustee, authorizing and securing $75 million Series 2010 Marine Terminal Revenue Bonds of HCIDC,
(ii) the
Amended and Restated Bond Indenture (the
Series 2011 Indenture
), dated as of August 19, 2014, between HCIDC and The Bank of New York Mellon Trust Company, National
Association, as trustee, authorizing and securing $50 million Series 2011 Marine Terminal Revenue Bonds of HCIDC and (iii) the Amended and Restated Bond Indenture (the
Series 2012 Indenture
and, together with the Series 2010
Indenture and the Series 2011 Indenture, the
IKE Bond Indentures
), dated as of August 19, 2014, between HCIDC and The Bank of New York Mellon Trust Company, National Association, as trustee, authorizing and securing $100
million Series 2012 Marine Terminal Revenue Bonds of HCIDC.
The IKE Bond Indentures include customary events of default, including
non-payment of principal of or interest on the IKE Bonds, violation of covenants (including under the applicable HCIDC Loan Agreement), bankruptcy and insolvency events, and an event of default under the Continuing Covenants Agreement described
below
.
On August 19, 2019, the IKE Bonds may be converted to bear interest on other terms for a successive term or terms on certain conditions at the option of HFOTCO and, if not converted, will continue to bear interest for successive
5-year terms at 3-month LIBOR plus a spread to be determined by a remarketing agent. If the IKE bonds are not remarketed to investors on August 19, 2019, or the end of any successive interest rate term, at a price equal to their principal
amount, they must be purchased by HFOTCO under the HCIDC Loan Agreement for a price equal to their principal amount. The IKE Bonds mature on November 1, 2050.
In connection with the conversion of the interest rate mode of the IKE Bonds from the Weekly Mode to the LIBOR Term Indexed Mode
contemporaneously with execution and delivery of the IKE Bond Indentures, certain purchasers purchased the IKE Bonds, and BGCT and HFOTCO, entered into a Continuing Covenant Agreement (the
Existing Continuing Covenant Agreement
),
dated as of August 19, 2014, by and among BGCT, as the parent, HFOTCO, as obligor, Bank of America, N.A., as administrative agent and collateral agent, and the bondholders party thereto. In connection with the Closing, the Existing Continuing
Covenant Agreement was modified pursuant to that certain Consent and Amendment (the
CCA Amendment
; the Existing Continuing Covenant Agreement, as modified by the CCA Amendment, the
Continuing Covenant
Agreement
), dated as of June 5, 2017 and effective as of the Closing Date.
The Continuing Covenant Agreement includes
customary representations and warranties and affirmative and negative covenants, which were made only for the purposes of the Continuing Covenant Agreement and as of the specific date (or dates) set forth therein, may be subject to certain
limitations as agreed upon by the contracting parties, and apply only to BGCT, HFOTCO and any subsidiaries of HFOTCO party to the Continuing Covenant Agreement. Such covenants include limitations on the creation of new liens, indebtedness, making of
certain restricted payments and payments on indebtedness, making certain dispositions, making material changes in business activities, making fundamental changes including liquidations, mergers or consolidations, making certain investments, entering
into certain transactions with affiliates, making amendments to certain credit or organizational agreements, modifying the fiscal year, creating or dealing with hazardous materials in certain ways, entering into certain hedging arrangements,
entering into certain restrictive agreements, funding or engaging in sanctioned activities, taking actions or causing the trustee to take actions that materially adversely affect the rights, interests, remedies or security of the bondholders, taking
actions to remove the trustee, making certain amendments to the bond documents, and taking actions or omitting to take actions that adversely impact the tax-exempt status of the IKE Bonds.
In addition, the Continuing Covenant Agreement contains financial performance covenants as follows:
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the super senior leverage ratio of BGCT and its restricted subsidiaries under the Continuing Covenant Agreement may not exceed 3.50 to 1.00 as of the last day of any fiscal quarter; and
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the interest coverage ratio of BGCT and its restricted subsidiaries under the Continuing Covenant Agreement may not be less than 2.00 to 1.00 as of the last day of any fiscal quarter.
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The Continuing Covenant Agreement includes customary events of default, including events of default relating to the inaccuracy of
representations and warranties in any material respect when made or when deemed made, non-payment of principal and other amounts owing under the Continuing Covenant Agreement, violation of covenants, acceleration of or right of holders to accelerate
any material indebtedness of BGCT, HFOTCO and its subsidiaries, bankruptcy and insolvency events, certain unsatisfied judgments, certain ERISA events, certain invalidities of bond, guaranty or collateral documents and the occurrence of a change of
control (excluding the change of control occurring on the Closing Date). A default under the Continuing Covenant Agreement would permit the bondholders to accelerate outstanding obligations under the Continuing Covenant Agreement (other than the IKE
Bonds), direct the trustee to accelerate the IKE Bonds, and subject to intercreditor arrangements with the creditors of the HFOTCO Credit Agreement, exercise other rights and remedies.
The obligations under the Continuing Covenant Agreement and the IKE Bonds are guaranteed by BGCT and to be guaranteed by any future material
domestic subsidiary of HFOTCO, and secured by a lien on substantially all of the property and assets of HFOTCO and the other loan parties, subject to customary exceptions and subject to intercreditor arrangements with the creditors under the HFOTCO
Credit Agreement.
The foregoing description is qualified in its entirety by reference to the full text of the IKE Bond Indentures, the
Existing Continuing Covenant Agreement, the CCA Amendment, the Original 2010 Loan Agreement, the First Amendment to 2010 Loan Agreement, the Original 2011 Loan Agreement, the First Amendment to 2011 Loan Agreement, the Original 2012 Loan Agreement
and the First Amendment to 2012 Loan Agreement, copies of which are filed as Exhibits 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10 and 4.11 to this Current Report on Form 8-K and are incorporated in this Item 2.03 by reference.