Item 1.01. Entry Into a Material Definitive Agreement.
On August 18, 2021, Brinker International, Inc. (the “Company") entered into a secured five-year revolving credit facility (the “Credit Facility”) as evidenced by the Credit Agreement (the “Credit Agreement”) with certain subsidiaries of the Company party thereto as guarantors (the “Guarantors”), JPMorgan Chase Bank, N.A. (“JPMorgan”), as Administrative Agent, and other lenders party thereto. Capitalized terms not defined in this description shall have the meanings given them in the Credit Agreement.
The proceeds from the Credit Facility were used to repay all obligations outstanding under the Company’s existing credit agreement, dated as of March 12, 2015, among the Company, the Guarantors, Bank of America, N.A. (“BofA”) as administrative agent and the other lenders party thereto (as amended, the “Existing Credit Agreement”), which was more specifically described in Item 1.01 of the Current Reports on Form 8-K filed on March 12, 2015, May 6, 2020, July 28, 2020 and Exhibit 10 in Form 10-Q for the period ended September 28, 2016, March 28, 2018 and December 25, 2019, which descriptions are incorporated by reference in this Item 1.01. The Existing Credit Agreement has been terminated as of August 18, 2021.
The Credit Agreement provides for a secured $800 million revolving credit facility. In addition to repaying the obligations under the Existing Credit Agreement, the proceeds of the Credit Facility will be used for working capital and general corporate purposes. The obligations under the Credit Agreement are secured by substantially all assets of the Company and the Guarantors (excluding, so long as the Company’s 3.875% Notes due 2023 remain outstanding, Principal Property and shares of Capital Stock or Debt in any Restricted Subsidiary).
Amounts outstanding under the Credit Agreement accrue interest at a rate equal to either, at the Company’s election, the Eurodollar Rate plus a margin of 1.50% to 2.25% per annum, or the Base Rate plus a margin of 0.50% to 1.25% per annum, in each case, depending on the Company’s Debt to Cash Flow Ratio, which does not include rent expense in the calculation of debt.
The covenants of the Credit Agreement include customary negative covenants that, among other things, restrict the Company’s ability to incur or guarantee additional indebtedness, grant liens, and make certain acquisitions, investments and asset dispositions. The Company may make and declare any Restricted Payment so long as after giving effect to the Restricted Payment the Company’s Debt to Cash Flow Ratio is less than 3.5 to 1. Additionally, the Company may make and declare $210 million in Restricted Payments per fiscal year so long as the Company is not in default. The Credit Agreement contains a financial covenant that requires the Company to maintain a Debt to Cash Flow Ratio as follows:
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Fiscal Quarters Ended
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Maximum Ratio
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June 30, 2021 through December 31, 2022
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4.50 to 1.00
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March 31, 2022 and thereafter
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4.00 to 1.00
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The Credit Agreement will expire on August 18, 2026. The Credit Agreement includes customary events of default, and customary rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate loans, terminate the commitments thereunder and realize upon the collateral securing the obligations under the Credit Agreement, which includes substantially all assets of the Company and the Guarantors (excluding, so long the Company’s 3.875% Notes due 2023 remain outstanding, Principal Property and shares of Capital Stock or Debt in any Restricted Subsidiary).
The lending parties under the Credit Agreement are JPMorgan, BofA, Wells Fargo Bank, N.A., Truist Bank, MUFG Bank, Ltd, US Bank National Association and Cooperative Rabobank U.A., New York Branch, several of which provide various other banking services to the Company.
The foregoing description is only a summary and it is qualified in its entirety by the specific terms of the Credit Agreement, which is filed as Exhibit 10.1 to this Current Report and is incorporated herein by reference.
Item 1.02. Termination of a Material Definitive Agreement.
On August 18 2021, the Company terminated the Existing Credit Agreement, as more specifically described in Item 1.01 of this Current Report on Form 8-K, which description, together with the discussion of the participants’ material relationships with the Company, is incorporated by reference in this Item 1.02.
The lending parties under the Existing Credit Agreement were JPMorgan, BofA, Wells Fargo Bank, N.A., Truist Bank, MUFG Bank, Ltd, US Bank National Association, Barclays Bank PLC, Regions Bank, Associated Bank National Association and PNC Bank, National Association, several of which provide various other banking services to the Company and are lenders under the Credit Agreement specifically described in Item 1.01 in this Current Report.