Entry into a Material Definitive Agreement.
On February 21, 2020, Applied Materials, Inc. (“Applied”) entered into a credit agreement (the “Credit Agreement”) for a five-year $1.5 billion revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (collectively, the “Lenders”).
The Credit Agreement replaces a $1.5 billion credit agreement, dated September 3, 2015, by and among Applied and certain lenders, as amended and extended, as described further in Item 1.02 below.
The Credit Agreement provides for unsecured borrowings in an initial amount not to exceed $1.5 billion outstanding at any one time and includes a sub-facility for the issuance of letters of credit of up to $400 million. The Credit Agreement includes a provision under which Applied may increase the total amount of the revolving credit facility to no more than $2.0 billion, subject to the receipt of commitments from one or more Lenders for any such increase and other customary conditions.
Borrowings under the Credit Agreement will bear interest, at Applied’s option, at a rate per annum equal to either (1) the London interbank offered rate, adjusted for any statutory reserve requirements for eurocurrency liabilities (but in no event less than zero) (“Adjusted LIBOR”) or (2) a rate (the “Base Rate”) equal to the highest of (a) the rate of interest published by The Wall Street Journal from time to time as the “Prime Lending Rate,” (b) a rate that is 0.5% higher than the federal funds effective rate (as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and (c) Adjusted LIBOR plus 1.0%, in either case, plus the applicable margin. The applicable margin will range, depending on Applied’s public debt credit ratings, from 0.625% to 1.125% during such period that Applied has elected that any borrowings under the Credit Agreement shall bear interest based on Adjusted LIBOR and from zero to 0.125% during such period that Applied has elected that any borrowings under the Credit Agreement shall bear interest based on the Base Rate. In addition, the Credit Agreement requires Applied to pay commitment fees on the unused commitments under the Credit Agreement ranging, depending on Applied’s public debt credit ratings, from 0.05% to 0.125% per annum and customary agency and letter of credit participation fees.
The Credit Agreement contains certain affirmative and negative covenants customary for credit facilities of this type. The Credit Agreement also contains a financial covenant that requires Applied to maintain as of the end of each fiscal quarter a ratio of (i) consolidated funded debt as of such date to (ii) consolidated adjusted EBITDA for the four fiscal quarter period ending on such date of not greater than 3.50 to 1.00 (which maximum ratio may be temporarily increased, at the election of Applied, to 4.00 to 1.00 following certain material acquisitions). The Credit Agreement also contains customary events of defaults. The occurrence of an event of default would permit the Lenders to terminate their commitments to advance loans under the Credit Agreement and to require immediate repayment of any outstanding loans under the Credit Agreement.
Proceeds from borrowings under the Credit Agreement are available to be used for general corporate purposes. The maturity date of the Credit Agreement is February 21, 2025, at which time the outstanding amount of loans under the Credit Agreement, if any, must be repaid in full.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by the full text of the Credit Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
The Lenders, and certain of their affiliates, have engaged in, and/or in the future may engage in, banking and other transactions with Applied, including previous credit facilities. These parties have received, and/or in the future may receive, customary compensation from Applied for these services.