Item 1.01. Entry into a Material Definitive Agreement.
On
July 28, 2020, Waste Management, Inc. (the “Company”) entered into a 364-day $3.0 billion U.S.
revolving credit facility, maturing July 27, 2021, with the lenders from time to time party thereto (the “Banks”)
and Mizuho Bank, Ltd., as administrative agent for the Banks (the “Agent”) (the “Credit Agreement”),
to be used for general corporate purposes, including acquisitions and the refinancing of indebtedness.
The
Credit Agreement provides the Company the option to convert outstanding balances into a term loan maturing no later than the first
anniversary of the maturity date, subject to the payment of a fee and notifying the Agent at least 15 days prior to the original
maturity date. Waste Management Holdings, Inc. a wholly-owned subsidiary of the Company, guarantees all the obligations under
the Credit Agreement.
Under
the Credit Agreement, the Company is required to pay, quarterly in arrears, an annual facility fee in an amount ranging from 0.125%
to 0.2% of the $3.0 billion borrowing availability under the agreement (the “Facility Fee”). Any borrowings under the
Credit Agreement will bear interest at (x) the London Interbank Offered Rate (“LIBOR”) for the applicable interest
period, plus a spread ranging from 1.0% to 1.3% per annum (a “Eurocurrency Loan”) or (y) a base rate equal to
the highest of (i) the U.S. Federal Funds Rate plus 0.5%, (ii) Mizuho Bank, Ltd.'s announced prime rate, or (iii) one-month
LIBOR plus 1.0%, plus, in each case, a spread ranging from zero to 0.3% per annum (a “Base Rate Loan”). In certain
instances, the Agent may approve a comparable or successor reference rate.
The
Facility Fee percentages and the spread applicable to Eurocurrency Loans and Base Rate Loans depend on the Company’s senior
public debt rating as determined by Standard & Poor’s and Moody’s. Based on the Company’s current senior
public debt rating, the Facility Fee is 0.15% per annum, the spread applicable to Eurocurrency Loans is 1.225% per annum, and the
spread applicable to Base Rate Loans is 0.225%.
The
Credit Agreement contains customary representations and warranties and affirmative and negative covenants. The Credit Agreement
contains one financial covenant, which sets forth a maximum total debt to consolidated earnings before interest, taxes, depreciation
and amortization (“EBITDA”) ratio. This covenant provides that the ratio of the Company’s total debt to its EBITDA
(the “Leverage Ratio”) for the preceding four fiscal quarters will not be more than 3.75 to 1, provided that if an
acquisition permitted under the Credit Agreement involving aggregate consideration in excess of $200 million occurs during the
fiscal quarter, the Company shall have the right to increase the Leverage Ratio to 4.25 to 1 during such fiscal quarter and for
the following three fiscal quarters (the “Elevated Leverage Ratio Period”). There shall be no more than two Elevated
Leverage Ratio Periods during the term of the agreement, and the Leverage Ratio must return to 3.75 to 1 for at least one quarter
between Elevated Leverage Ratio Periods. The calculation of all components used in the Leverage Ratio covenant are as defined in
the Credit Agreement. The Credit Agreement also contains certain restrictions on the ability of the Company’s subsidiaries
to incur additional indebtedness as well as restrictions on the ability of the Company and its subsidiaries to, among other things,
incur liens; engage in sale-leaseback transactions; and engage in mergers and consolidations.
The Credit Agreement contains customary events of default, including nonpayment of principal
when due; nonpayment of interest, fees or other amounts after a stated grace period; inaccuracy of representations and warranties;
violations of covenants, subject in certain cases to negotiated grace periods; certain bankruptcies and liquidations; a cross-default
of more than $200 million; certain unsatisfied judgments of more than $200 million; certain ERISA-related events; and a change
in control of the Company (as specified in the agreement). If an event of default occurs and is continuing, the Company may be
required to repay all amounts outstanding under the Credit Agreement. The Agent may, and upon the request of Banks that hold more
than 50% of the commitments under the Credit Agreement shall, accelerate the maturity of all amounts due upon the occurrence and
during the continuation of an event of default.
Several
of the Banks that are party to the Credit Agreement have in the past performed, and may in the future from time to time perform,
investment banking, financial advisory, lending and/or commercial banking services for the Company and its subsidiaries, for which
they have received, and may in the future receive, customary compensation and reimbursement of expenses.
The
Credit Agreement is Exhibit 10.1 to this Current Report on Form 8-K. The above description of the Credit Agreement is
not complete and is qualified in its entirety by reference to the exhibit.