Item 1.01 Entry into a Material Definitive Agreement.
On November 8, 2017, Avery Dennison Corporation, a Delaware corporation (the Company), entered into a Fourth Amended and Restated Credit Agreement (the Credit Agreement), with a syndicate of lenders party thereto, Bank of America, N.A., as administrative agent, Citibank, N.A., as syndication agent, and JPMorgan Chase Bank, N.A., as documentation agent. The Credit Agreement amends and restates the Companys Third Amended and Restated Credit Agreement dated as of October 3, 2014.
Under the Credit Agreement, the Company may borrow up to an aggregate of $800 million in revolving loans (the Loans). At the discretion of the lenders and subject to certain customary requirements, the commitments under the Credit Agreement may be increased by up to an aggregate of $300 million upon the Companys request. The maturity date is November 8, 2022; however, the Company may request that the commitments be extended for one-year periods under certain circumstances as set forth in the Credit Agreement.
Loans outstanding under the Credit Agreement bear interest, at the Companys option, at the base rate or the Eurocurrency rate, in each case plus an applicable per annum margin. The applicable per annum margin is determined based on the Companys debt ratings in accordance with a pricing grid, with the per annum margin for base rate borrowings ranging from 0.00% to 0.375% and the per annum margin for Eurocurrency rate borrowings ranging from 0.910% to 1.375%. The terms base rate and Eurocurrency rate have meanings customary for financings of this type. Fees payable for the revolving commitments under the Credit Agreement, whether used or unused, are also determined based on the Companys debt ratings in accordance with a pricing grid, with the per annum percentage ranging from 0.090% to 0.250%.
The Loans may, at the Companys option, be prepaid in whole or in part without premium or penalty (subject to breakage costs for Eurocurrency rate loans) and the Company may reduce or terminate the commitments of the lenders to make the Loans.
The Credit Agreement contains customary affirmative and negative covenants, including limitations on mergers, asset sales, liens, investments, and subsidiary indebtedness. In addition, the Credit Agreement requires the Company to maintain (i) a maximum leverage ratio (calculated as a ratio of consolidated debt to consolidated EBITDA) of not more than 3.50 to 1.00; provided that, in the event of an acquisition by the Company that exceeds $250 million, the maximum leverage ratio shall be increased to 3.75 to 1.00 for the period of four consecutive fiscal quarters immediately following such acquisition and (ii) a minimum interest coverage ratio (calculated as a ratio of consolidated EBITDA to consolidated interest expense) of not less than 3.50 to 1.00.
The summary of the Credit Agreement contained herein is qualified in its entirety by reference to the terms of the Credit Agreement, a copy of which is filed as Exhibit 10.1 and incorporated herein by reference.