Item 1.01 - Entry into a Material Definitive Agreement
Credit Agreement
On April 2, 2020 (the “Closing Date”), Workday, Inc. (“Workday”) entered into a Credit Agreement (the “Credit Agreement”) by and among Workday, its subsidiaries party thereto from time to time, the several lenders from time to time party thereto (the “Lenders”), Bank of America, N.A., as administrative agent, swing line lender and L/C issuer (in such capacities, the “Administrative Agent”), and the other L/C issuers party thereto, pursuant to which the Lenders would extend to Workday a term loan facility in an aggregate original principal amount of $750,000,000 and a revolving credit facility in an aggregate principal amount of $750,000,000.
Revolving loans may be borrowed, repaid and reborrowed until April 2, 2025 (the “Maturity Date”), at which time all amounts borrowed must be repaid. Workday may request, no more than two times during the term of the Credit Agreement, that each revolving Lender extend the Maturity Date for the revolving loans for one year.
The term loan facility may be drawn in two individual drawings: (a) at the Closing Date in an amount not to exceed $500,000,000 and (b) prior to July 15, 2020, in an amount not to exceed $250,000,000 (such period from the Closing Date to July 15, 2020, the “Term Loan Availability Period”), subject to certain customary conditions. The term loans mature on the Maturity Date and provide for quarterly repayment in installments of the principal amount on the last Business Day (as defined in the Credit Agreement) of each of April, July, October and January, beginning October 2020, at a rate of 1.25% of the principal amount per quarter through January 2022 and 2.50% of the principal amount per quarter thereafter.
Revolving loans and term loans may be prepaid, and revolving loan commitments and term loan commitments may be permanently reduced by Workday in whole or in part, without penalty or premium.
As of April 2, 2020, Workday had an outstanding term loan of $500,000,000 and had no outstanding revolving loans under the Credit Agreement.
Revolving loans and term loans under the Credit Agreement will bear interest, at Workday’s option, at either (i) a floating rate per annum equal to the base rate plus a margin of from 0.000% to 0.625% depending on Workday’s Consolidated Leverage Ratio (as defined in the Credit Agreement) or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market plus a margin of from 1.000% to 1.625% depending on Workday’s Consolidated Leverage Ratio. The swing line loans under the Credit Agreement will bear interest at a floating rate per annum equal to the base rate plus a margin of from 0.000% to 0.625% depending on Workday’s Consolidated Leverage Ratio. The fee applied to letters of credit shall be from 1.000% to 1.625% depending on Workday’s Consolidated Leverage Ratio. During a payment event of default under the Credit Agreement, the applicable interest rates are increased by 2.0% per annum.
In the Credit Agreement, the base rate is defined as the greatest of (i) Bank of America’s prime rate, (ii) the federal funds rate plus 0.50% or (iii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market for a period of one month (but not less than zero) plus 1.00%. Loans based on the base rate shall be made only to domestic borrowers and denominated in U.S. Dollars.
Loans may be denominated in U.S. Dollars or in Euros, Sterling and Canadian Dollars, together with any other currency that is approved by the Administrative Agent (the “Alternative Currencies”). Loans denominated in Alternative Currencies may not exceed an aggregate of $375,000,0000.
Under the Credit Agreement, Workday will pay to the Administrative Agent for the account of each revolving lender a commitment fee on a quarterly basis based on amounts committed but unused under the revolving facility of from 0.090% to 0.225% per annum, depending on Workday’s Consolidated Leverage Ratio. Workday will also pay to the Administrative Agent for the account of each term lender a ticking fee on a quarterly basis based on the term loan commitments of the term loan lenders from 0.090% to 0.225% for the Term Loan Availability Period. Workday is also obligated under the Credit Agreement to pay the Administrative Agent fees customary for credit facilities of these sizes and types.
The Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain merger transactions and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires Workday not to exceed a maximum leverage ratio of 3.50:1.00, subject to a step-up to 4.50:1.00 at the election of Workday for a certain period following an Acquisition (as defined in the Credit Agreement), as more fully described in the Credit Agreement.
The Credit Agreement includes customary events of default that include among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control and certain material ERISA events. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement.
The Administrative Agent and the Lenders, and certain of their respective affiliates, have provided, and in the future may provide, financial, banking and related services to Workday. These parties have received, and in the future may receive, compensation from Workday for these services.
The foregoing summary and description of the provisions of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Agreement, a copy of which is filed as Exhibit 10.1 with this Current Report on Form 8-K and is incorporated herein by reference.