Item 1.01. Entry into a Material Definitive Agreement
As previously disclosed, on March 2, 2020, United States Cellular Corporation (UScellular) entered into a $300,000,000 Credit Agreement by and among UScellular as Borrower, Toronto Dominion (Texas) LLC, as Administrative Agent, and the other lenders party thereto and identified therein (Existing Credit Agreement). On July 20, 2021 (the Effective Date), the Existing Credit Agreement was amended and restated in its entirety (First Amended and Restated Credit Agreement).
The First Amended and Restated Credit Agreement provides UScellular with a $300,000,000 senior revolving credit facility for general corporate purposes, including working capital and capital expenditures.
The following briefly describes the terms of the First Amended and Restated Credit Agreement:
Borrowings under the First Amended and Restated Credit Agreement bear interest either at a LIBOR rate (subject to customary LIBOR replacement protocols) or at an alternative base rate, plus an applicable margin. UScellular’s interest costs under the First Amended and Restated Credit Agreement are based on credit ratings from Standard & Poor’s Rating Services, Moody’s Investor Services and/or Fitch Ratings. If UScellular’s credit ratings were lowered, the credit facility would not cease to be available solely as a result of a decline in its credit ratings.
The two financial covenants described below are included in the First Amended and Restated Credit Agreement:
1.Consolidated Interest Coverage Ratio (the ratio of Consolidated EBITDA to Consolidated Interest Charges) may not be less than 3.00 to 1.00 as of the end of any fiscal quarter.
2.Consolidated Leverage Ratio (the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA) may not be greater than 3.75 to 1.00 as of the end of any fiscal quarter.
The First Amended and Restated Credit Agreement is unsecured, subject to certain limitations. Additionally, certain wholly-owned subsidiaries are guarantors under the First Amended and Restated Credit Agreement.
The First Amended and Restated Credit Agreement includes representations and warranties, covenants, events of default and other terms and conditions that are substantially similar to UScellular’s Existing Credit Agreement.
A Change in Control, as such term is defined in the First Amended and Restated Credit Agreement, of TDS (as defined below) or UScellular would constitute a default and would enable the required lenders and the Administrative Agent to require all borrowings outstanding under the First Amended and Restated Credit Agreement to be repaid.
The continued availability of the First Amended and Restated Credit Agreement requires UScellular to comply with certain negative and affirmative covenants, maintain the above financial ratios and provide representations on certain matters at the time of each borrowing.
Amounts under the First Amended and Restated Credit Agreement may be borrowed, repaid and reborrowed from time to time from and after the Effective Date until the maturity date. There are no outstanding borrowings under the Revolving Credit Agreement as of the Effective Date, except for letters of credit.
Amounts borrowed under the First Amended and Restated Credit Agreement will be due and payable in full on the fifth anniversary of the Effective Date.
The foregoing brief description is qualified by reference to the copy of the First Amended and Restated Credit Agreement attached hereto as Exhibit 4.1, which is incorporated herein by reference, and which identifies all the lenders thereto.
Some of the lenders and/or agents under the First Amended and Restated Credit Agreement and/or their affiliates may have various relationships with UScellular, its parent, Telephone and Data Systems, Inc. (TDS), and their subsidiaries involving banking or other financial services, including checking, cash management, brokerage, lending, investment banking, depository, indenture trustee and/or other services, including serving as a lender under the First Amended and Restated Credit Agreement or other TDS and/or UScellular credit agreements.
In connection with the First Amended and Restated Credit Agreement, UScellular and TDS entered into a Subordination Agreement dated the Effective Date together with Toronto Dominion (Texas) LLC, as Administrative Agent. Pursuant to the First Amended and Restated Credit Agreement and this Subordination Agreement, (a) any consolidated funded indebtedness from UScellular to TDS will be unsecured and (b) any consolidated funded indebtedness, will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under the First Amended and Restated Credit Agreement. As of the date of this Form 8-K, there is no outstanding funded indebtedness of UScellular that is subordinated pursuant to the Subordination Agreement. The form of the Subordination Agreement is attached as an exhibit to the First Amended and Restated Credit Agreement attached hereto as Exhibit 4.1.