Item 1.01. Entry into a Material Definitive Agreement.
Bridge Loan Agreement; Refinancing of Non-Recourse Debt
On September 27, 2019 (the “Closing Date”), OMX Timber Finance Investments I, LLC, as borrower (the “Borrower”), a bankruptcy remote indirect subsidiary of Office Depot, Inc. (the “Company”), entered into a term loan agreement (the “Bridge Loan Agreement”) with Wells Fargo Bank, National Association, as lender (the “Lender”) for a loan commitment in the aggregate principal amount of $735 million (the “Bridge Loan Commitment”). The Company is not a party to the Bridge Loan Agreement and therefore not subject to the terms of the agreement.
The Bridge Loan Agreement, subject to the terms and conditions set forth therein, provides for the Lender to make available to the Borrower a loan (the “Bridge Loan”) on October 31, 2019 (the “Effective Date”) in a principal amount not to exceed the Bridge Loan Commitment, to be used in refinancing the Borrower’s maturing securitization notes (the “Non-Recourse Debt”). The Bridge Loan accrues interest at a rate equal to 3-month LIBOR plus 0.75% per annum from October 31, 2019 through January 29, 2020 (“Maturity Date”). The principal balance of the Bridge Loan is due and payable, together with all accrued and unpaid interest, on the Maturity Date. The Bridge Loan is non-recourse to the Company and is secured by the $817.5 million credit-enhanced timber installment notes (the “Installment Notes”) and the guaranty (the “Guaranty”, collectively with the Installment Notes, the “Collateral”) by Wells Fargo & Company (as successor by merger to Wachovia Corporation, a North Carolina corporation) (the “Guarantor”) of the obligations under the Installment Notes, that were part of the consideration received by OfficeMax Incorporated (“OfficeMax”) in the sale of its legacy timberland assets in 2004 and acquired by the Company as part of the 2013 merger of the Company and OfficeMax (the “OfficeMax Merger”). The Bridge Loan Agreement provides that the Bridge Loan Commitment shall automatically terminate if any or all of it remains outstanding after November 6, 2019.
Proceeds of the Bridge Loan will be used by the Borrower to pay off and satisfy in full the Non-Recourse Debt with a scheduled maturity date of October 31, 2019, acquired by the Company as part of the OfficeMax Merger, and issued and outstanding under the indenture, dated as of December 21, 2004 (the “Indenture”), by and between the Borrower, as issuer, and Wells Fargo Trust Company, National Association (f/k/a Wells Fargo Bank, Northwest, N.A.), as indenture trustee. The Borrower delivered to the indenture trustee a repayment notice on September 30, 2019, in accordance with the terms of the Indenture.
In connection with the Bridge Loan Agreement, the Borrower entered into a security agreement dated as of September 27, 2019 with the Lender (the “Security Agreement”). Pursuant to the Security Agreement, the Lender has a lien on and security interest in the Collateral on the Closing Date, and will have a perfected first priority security interest (other than certain permitted liens) in the Collateral on the Effective Date to guarantee the payment in full of the Bridge Loan by the Borrower. Upon payment in full of the Bridge Loan to the Lender, the Borrower would have no further obligations to the Lender under the Bridge Loan Agreement, and the excess Collateral will be released from the lien of the Security Agreement in accordance with the provisions of the Bridge Loan Agreement.
The Bridge Loan Agreement contains representations and warranties and affirmative and negative covenants customary for financings of this type as well as customary events of default.
The Bridge Loan Agreement contains customary events of default, limited to the following: nonpayment of principal and interest when due; nonpayment of certain credit party expenses within 15 days of written demand and nonpayment of other obligations (excluding principal and interest) for a period of 5 Business Days; default in performance in any material respect of any covenant or agreement of the Borrower in the Bridge Loan Agreement (subject to a 5 Business Days cure period for certain covenants) or incorrectness of representations and warranties in any material respect; bankruptcy and insolvency of the Borrower, the Guarantor or Boise Land & Timber, L.L.C. (with respect to an involuntary insolvency proceeding, if not dismissed within 30 days with respect to the Borrower or the Guarantor and 60 days with respect to Boise Land & Timber, L.L.C.); impairment of security interests in the Collateral; if Borrower is required to be registered as an “investment company” under the Investment Company Act; the termination or attempted termination of the Guaranty/failure by Guarantor to honor a demand for payment by the Lender under the Guaranty/payment by Guarantor under the Guaranty in violation of certain payment direction letters; actual or asserted invalidity of the Bridge Loan Agreement or other transaction documents; occurrence of a change of control as described in the Bridge Loan Agreement; or a cross default to any event of default under the Installment Notes (after giving effect to any applicable grace periods).
The Lender is also a party to the Company’s Second Amended and Restated Credit Agreement dated as of May 13, 2016, as amended, and the Credit Agreement dated as of November 8, 2017, as amended.