ITEM 1.01. Entry into a Material
Definitive Agreement.
On August 12, 2019 (“
Effective
Date
”), Ralph Lauren Corporation (the “
Company
”) and certain of its foreign subsidiaries (collectively
with the Company, the “
Borrowers
”) entered into a definitive credit agreement (the “
Agreement
”)
for a revolving credit facility (the “
Facility
”) with JPMorgan Chase Bank, N.A., as administrative agent (the
“
Administrative Agent
”), Bank of America, N.A. as syndication agent, Wells Fargo Bank, N.A., HSBC
Bank USA, N.A., ING Bank N.V., Dublin Branch and Deutsche Bank Securities Inc. as co-documentation agents and a syndicate of financial
institutions and institutional lenders (the “
Lenders
”). The Facility may be used to finance the working
capital needs, capital expenditures, certain investments and general corporate purposes of the Borrowers and their subsidiaries
(which may include commercial paper back-up) and for funding of acquisitions. Letters of credit (the “
Letters
of Credit
”) may be issued under the Agreement as described below. Certain terms and conditions of the Facility
are as follows:
Structure
. The Agreement provides for
a five-year, with options for extension, senior revolving credit facility in an aggregate amount at any one time outstanding of
up to $500 million, including sub-facilities for Letters of Credit. In addition, the Agreement provides that the revolving
commitments under the Facility may be increased to $1 billion, subject to certain terms and conditions. The Facility
will mature in August 2024. Loans may be made, at the Borrowers’ election, in Euros, Hong Kong Dollars, Japanese Yen and
certain other currencies, in addition to U.S. Dollars.
Letters of Credit
. The Facility will
be available for the issuance of Letters of Credit by the Administrative Agent or one or more other Lenders. Standby Letters of
Credit may be issued in respect of obligations of the Company or any of its subsidiaries incurred pursuant to contracts made or
performances undertaken, or to be undertaken, or like matters relating to contracts to which the Company or any of its subsidiaries
is, or proposes to become, a party in the ordinary course of business, including, but not limited to, for insurance purposes and
in connection with lease transactions. Commercial Letters of Credit may be issued to finance purchases of goods by the
Company and its subsidiaries in the ordinary course of business. The aggregate amount outstanding at any time with respect
to Letters of Credit may not exceed $50 million.
Interest Rates and Fees
. Pursuant to
the Agreement, borrowings under the Facility bear interest at a rate per annum equal to, at the Borrowers’ option, either
(a) an alternate base rate or (b) a rate based on the rates applicable for deposits in the interbank market for U.S. Dollars or
the applicable currency in which the loans are made (the “
Adjusted LIBO Rate
”) plus an applicable margin. The
applicable margin for Adjusted LIBO Rate loans will be adjusted by reference to a grid (the “
Pricing Grid
”)
based on ratings for the Company’s senior, unsecured long-term indebtedness provided by established ratings agencies. Additionally,
the Borrowers will pay a commitment fee, calculated at a rate per annum determined in accordance with the Pricing Grid, on the
average daily unused amount of the Facility, payable quarterly in arrears, and certain fees with respect to Letters of Credit that
are issued.
Optional Prepayments and Commitment Reductions
. Loans
under the Agreement may be prepaid and commitments may be terminated or reduced by the Borrowers without premium or penalty (other
than “breakage costs” described below under “Yield Protection”) in minimum amounts of generally, in the
case of prepayments, $500,000, and in the case of partial commitment reductions, $1 million.
Guarantors
. The Facility is guaranteed
by certain direct and indirect domestic subsidiaries of the Company which became party to a Guarantee Agreement dated as of the
Effective Date and each domestic subsidiary that, subsequent to the Effective Date, becomes a Significant Subsidiary (as defined
in Regulation S-X, part 210.1-02 of Title 17 of the Code of Federal Regulations).
Restrictive Covenants and Other Matters
. The
Agreement contains negative covenants that, subject to significant exceptions, limit the ability of the Company and its subsidiaries
to, among other things, incur debt, engage in new lines of business, incur liens, engage in mergers, consolidations, liquidations
and dissolutions, dispose of substantially all of the assets of the Company and its subsidiaries, make investments, loans, advances,
guarantees and acquisitions and enter into transactions with affiliates. The Company and its subsidiaries must also meet on a quarterly
basis a test based on the ratio of (a) consolidated debt and operating lease obligations to (b) consolidated earnings before interest,
taxes, depreciation, amortization and operating lease expense.
Events of Default
. The Agreement contains
events of default that are customary for a facility of this nature, including (subject in certain cases to grace or cure periods)
nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties,
violation of covenants, cross-default to other material indebtedness, guarantees ceasing to be in full force or effect, bankruptcy
or insolvency events, certain events arising under the Employee Income Retirement Security Act of 1974, as amended, material judgments
and a failure of Mr. Ralph Lauren or persons related to him to maintain control of the Company as specified in the Agreement. If
an event of default occurs, the commitments of the Lenders to lend under the Facility may be terminated and the maturity of the
amounts owed may be accelerated.
Yield Protection
. The Agreement contains
customary provisions including indemnification of the Lenders for “breakage costs” incurred in connection with, among
other things, any prepayment of a loan bearing interest based upon the Adjusted LIBO Rate on a day other than the last day of an
interest period with respect to such loan.
In the ordinary course of their business, the Lenders and certain
of their affiliates have in the past or may in the future engage in investment and commercial banking or other transactions of
a financial nature with the Company or its affiliates, including the provision of certain advisory services and the making of loans
to the Company and its affiliates. In particular, certain affiliates of the Lenders are agents and/or lenders under
the Amended and Restated Credit Agreement, dated as of February 11, 2015, by and among the Company, certain of its foreign subsidiaries,
the lenders party thereto, the Administrative Agent, and Bank of America, N.A., as syndication agent, Wells Fargo Bank, N.A., HSBC
Bank USA, N.A. and Deutsche Bank AG New York Branch, as co-documentation agents (as amended from time to time, the
“
Existing Credit Facility
”). The Existing Credit Facility will terminate on the Effective Date.
This summary does not purport to be complete and is qualified
in its entirety by reference to the Agreement which is attached hereto as Exhibit 10.1. Interested parties should read
this document in its entirety.