The Farm Credit Term Loan Credit Agreement will mature (i) with respect to the 2023-A First Lien Term Loans, on March 1, 2030, and (ii) with respect to the 2023-B First Lien Term Loans, on November 30, 2028. It will bear interest at a floating rate per annum of, at the Borrower Representative’s option, (i) with respect to the 2023-A First Lien Term Loans, SOFR plus 6.00% or a base rate plus 5.00%, and (ii) with respect to the 2023-B First Lien Term Loans, SOFR plus 5.75% or a base rate plus 4.75%. The SOFR rate is subject to an interest rate floor of 0.75% and the base rate is subject to an interest rate floor of 1.75%. Borrowings under the Farm Credit Term Loan Credit Agreement will amortize in equal quarterly installments in an amount equal to equal quarterly installments equivalent to 5.00% per annum of the principal amount. The Farm Credit Term Loan Credit Agreement ranks pari passu with the First Lien Term Loan Credit Agreement and the 2028 Notes.
The ABL Credit Agreement will mature on March 1, 2028. It bears interest at a floating rate per annum of, at Domtar’s option, SOFR plus an applicable margin of 1.50% to 2.00% or a base rate plus 0.50% to 1.00%, in each case, depending on excess availability. The SOFR rate is subject to an interest rate floor of 0.00% and the base rate is subject to an interest rate floor of 1.00%. Borrowings under the ABL Credit Agreement will be limited by borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, plus specified percentages of eligible inventory, plus specified percentages of qualified cash, minus the amount of any applicable reserves. Domtar and Co-Borrower may borrow only up to the level of their then-current borrowing base. The ABL Credit Agreement will be subject to an unused line fee of 0.25% to 0.375%, depending on utilization. As of March 1, 2023, after giving effect to the Merger, outstanding borrowings under the ABL Credit Agreement totaled $210.0 million to partially fund the Merger and provide liquidity, and letters of credit totaled $179.0 million, leaving unused commitments available to Domtar of up to $611.0 million (subject to borrowing base capacity).
Guarantees of Domtar Senior Secured Notes due 2028
On March 1, 2023, upon the consummation of the Merger, the Company, Domtar, the U.S. Subsidiary Guarantors and The Bank of New York Mellon entered into (i) a supplemental indenture to the Indenture, dated as of October 18, 2021 (as supplemented and amended, the “Senior Secured Notes Indenture”), by and among Domtar, the guarantors party thereto and The Bank of New York Mellon, as trustee and collateral agent, governing Domtar’s outstanding 6.750% senior secured notes due 2028 (the “2028 Notes”), pursuant to which the Company and the U.S. Subsidiary Guarantors provided unconditional guarantees of the obligations of Domtar under the Senior Secured Notes Indenture and the 2028 Notes on a senior secured basis, and (ii) a supplement to the Notes Security Agreement, dated as of November 30, 2021, by and among Domtar, Holdings, the grantors party thereto and The Bank of New York Mellon, as trustee and collateral agent, whereby the Company and the U.S. Subsidiary Guarantors granted a security interest in substantially all of their assets, subject to customary exceptions, secured by a lien on substantially all fixed assets of the Company and the U.S. Subsidiary Guarantors, and a second-priority lien on the current asset collateral in the United States (second in priority to the liens securing the ABL Credit Agreement), subject to other permitted liens.
The 2028 Notes may be redeemed prior to maturity under certain circumstances. On or after October 1, 2024, Domtar may redeem some or all of the 2028 Notes at the redemption prices specified in the Senior Secured Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. Prior to October 1, 2024, Domtar may redeem the 2028 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, plus a “make-whole” premium described in the Senior Secured Notes Indenture. Prior to October 1, 2024, Domtar may also redeem during each calendar year commencing with 2021 up to 10% of the original aggregate principal amount of the 2028 Notes, at its option, from time to time at a redemption price equal to 103% of the aggregate principal amount of the 2028 Notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. Prior to October 1, 2024, Domtar may also redeem up to 40% of the original aggregate principal amount or then outstanding amount of the Notes with the net proceeds of certain equity offerings at a redemption price equal to 106.750% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
The Senior Secured Notes Indenture contains customary negative covenants, including, but not limited to, restrictions on the incurrence of additional indebtedness or the guarantee of indebtedness; the payment of dividends or making other distributions in respect of, or repurchase or redemption of, Domtar’s capital stock; the prepayment, redemption or repurchase of certain indebtedness; the issuance of certain preferred stock or similar equity securities; the making of loans and investments; the sale or other disposal of assets; the incurrence of liens; entrance into transactions with affiliates; entrance into agreements restricting subsidiaries’ ability to pay dividends; and the consolidation, merger or sale of all or substantially all of Domtar’s assets.