Item 1.01.
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Entry into a Material Definitive Agreement.
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On June 28, 2019, Tredegar Corporation (the “
Company
”), as borrower, entered into a $500,000,000, five-year, revolving, secured credit facility (the “
Credit Agreement
”) with the lenders
named therein, JPMorgan Chase Bank, N.A., as administrative agent (the “
Agent
”), SunTrust Bank, Citizens Bank, N.A. and PNC Bank, National Association, as co-syndication agents, and U.S. Bank National Association, Bank of America, N.A. and
Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto (collectively, the “
Lenders
”). Subject to certain terms and conditions, the Company may increase the original principal amount of the
Credit Agreement by an additional $100,000,000. Additionally, certain of the Company’s material domestic subsidiaries, as guarantors (the “
Guarantors
”), entered into a separate guaranty agreement (the “
Guaranty
”), pursuant to which the
Guarantors guarantee to the Lenders all of the obligations of the Company and each other Guarantor under the Credit Agreement, any notes and the other loan documents, including any obligations under hedging and treasury management arrangements.
Financial highlights of the Credit Agreement include the following:
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A credit spread for LIBOR-based revolving loans ranging from 1.50% at a leverage ratio (consolidated total debt-to-consolidated EBITDA, as defined) of less than or equal to 1.00x, to 2.00% at a leverage ratio of greater than 3.50x
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Debt covenants including, among others:
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A maximum leverage ratio of 4.00x computed each quarter on a trailing four-quarter basis
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A minimum interest coverage ratio (consolidated EBITDA-to-consolidated interest expense, as defined) of 3.00x computed each quarter on a trailing four-quarter basis
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Restrictions on payments for dividends and stock repurchases for the life of the agreement at $130 million plus 50% of quarterly consolidated net income (as defined), and, at a leverage ratio of equal to or greater than 3.00x, a
limitation on such payments for the succeeding quarter at the greater of (i) $4.75 million and (ii) 50% of consolidated net income for the most recent fiscal quarter.
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The Company and the Guarantors also entered into a separate pledge and security agreement (the “
Security Agreement
”), pursuant to which the Company and the Guarantors pledge substantially all
of their assets, including equity in their direct domestic subsidiaries and certain material first-tier foreign subsidiaries, in favor of the Lenders as collateral for the obligations under the Credit Agreement, any notes and the other loan
documents. From time to time, the Company may be required to cause additional material domestic subsidiaries to become guarantors under the Guaranty and grantors under the Security Agreement and to cause the equity of additional material first-tier
foreign subsidiaries to be pledged in favor of the Agent for the benefit of the Lenders.
The Credit Agreement amends and restates the Company’s $400,000,000 revolving, secured credit agreement with the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent, dated
March 1, 2016.
The Credit Agreement provides for revolving credit loans to the Company in multiple currencies. Such borrowings will bear interest at a rate per annum equal to, at the option of the Company, (i) the
Alternate Base Rate (defined as the greatest of (a) prime rate in effect on such day, (b) the federal funds rate plus ½ of 1% or (c) the Adjusted LIBO Rate for a one month interest period in dollars on such day plus 1%) or (ii) the Adjusted LIBO Rate
(defined as the applicable London Interbank Offered Rate for any interest period multiplied by a statutory reserve rate). Both the Alternate Base Rate and the Adjusted LIBO rate will have a margin added determined by the Company’s leverage ratio.
Loans bearing interest at the Alternate Base Rate may only be made in dollars. The Credit Agreement also permits the issuance of letters of credit and swingline loans.
The Credit Agreement contains representations, warranties, covenants, terms and conditions customary for transactions of this type, including maximum leverage ratio and minimum interest coverage
ratio financial covenants, limitations on liens, incurrence of debt, investments, mergers and asset dispositions, covenants to preserve corporate existence and comply with laws, covenants on the use of proceeds of the credit facility and default
provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants, cross-defaults and guarantor defaults. The occurrence of an event of default under the Credit Agreement could result
in all loans and other obligations becoming immediately due and payable and the facility being terminated.
The Company and its affiliates regularly engage the Lenders to provide other banking services. All of these engagements are negotiated at arm’s length.
The foregoing description of the Credit Agreement, the Guaranty and the Security Agreement is not complete and is qualified in its entirety by reference to the entire Credit Agreement, the Guaranty
and the Security Agreement, copies of which are attached hereto as Exhibits 4.1, 4.2 and 4.3, respectively, and incorporated herein by reference.