Item 1.01. Entry into a Material Definitive Agreement.
Five Year Credit Agreement
On March 31, 2021, Atmos Energy Corporation (the “Company”) entered into a Revolving Credit Agreement (the “Five Year Credit Agreement”) with Crédit Agricole Corporate and Investment Bank (“Crédit Agricole”), as the Administrative Agent, the syndication agents, the documentation agents, the lead arrangers and bookrunners named therein, and the lenders named therein, providing the Company with a $1.5 billion senior unsecured revolving credit facility (the “Five Year Credit Facility”) for a five year term. The Company has the option to twice extend the five year term for one additional year, subject to satisfaction of customary conditions, for a maximum term of up to seven years. The Five Year Credit Facility contains the requirement that all borrowings must be paid within 364 days and that no borrowings be outstanding under the Five Year Credit Facility for a period of at least thirty consecutive days (the “Clean-Up Period”) during each fiscal year of the Company, with the timing of each Clean-Up Period to be at the Company’s discretion. The Five Year Credit Facility also contains an accordion-type feature, which allows the Company to propose up to a $250 million increase in the lenders’ commitments. Proceeds of the Five Year Credit Facility will be used by the Company for working capital, capital expenditures and other general corporate purposes.
Borrowings under the Five Year Credit Facility will bear interest at a rate dependent on the Company’s credit ratings and based, at the Company’s election, on a defined base rate or on LIBOR for the applicable interest period. In the case of borrowings based on the base rate, an applicable margin ranging from 0.000% to 0.250% will apply, based on the Company’s then-current credit ratings. The base rate is defined as the highest of (i) the per annum rate of interest established by Crédit Agricole as its prime lending rate at the time of such borrowing, (ii) the Federal Funds Rate, as in effect at the time of borrowing, plus one-half of one percent (0.50%) per annum, or (iii) the one-month LIBOR plus one percent (1.00%). In the case of borrowings based on LIBOR, an applicable margin ranging from 0.750% to 1.250% will apply, based on the Company’s then-current credit ratings. The effective total interest rate may be modified in the event of a change in the Company’s credit ratings.
The Company must also pay commitment fees quarterly in arrears on the average daily unused portion of the credit facility at rates ranging from 0.060% to 0.175% per annum, dependent upon the Company’s credit ratings. Based upon the Company’s current credit ratings, the commitment fee would be at the rate of 0.125%.
The Five Year Credit Facility will expire on March 31, 2026, at which time all outstanding amounts under the Five Year Credit Facility will be due and payable. The Five Year Credit Facility contains usual and customary covenants for transactions of this type, in each case substantially similar to the Three Year Credit Facility. In addition, the Five Year Credit Facility provides that during the term of the facility, the Company’s debt to capitalization ratio as of the last day of each of its fiscal quarters shall be less than or equal to 0.70 to 1.00, excluding from the calculation of debt (i) any pension and other post-retirement benefits liability adjustments recorded in accordance with generally accepted accounting principles; and (ii) an amount of hybrid securities, as defined in the Five Year Credit Facility (generally, deferrable interest subordinated debt with a maturity of at least 20 years), not to exceed a total of 15% of total capitalization.
In the event of a default by the Company under the Five Year Credit Facility, including cross-defaults relating to specified other indebtedness of the Company, Crédit Agricole may, upon the consent of lenders holding a certain minimum of loans, and shall, upon the request and direction of such lenders, declare the amounts under the Five Year Credit Facility outstanding, including all accrued interest and unpaid fees, payable immediately, and enforce any and all rights and interests created and existing under the Five Year Credit Facility documents, including, without limitation, all rights of set-off and all other rights available under the law. For certain events of default relating to insolvency, bankruptcy or receivership, the amounts outstanding under the Five Year Credit Facility automatically become payable immediately.
Three Year Credit Agreement
On March 31, 2021, the Company also entered into a Revolving Credit Agreement (the “Three Year Credit Agreement,” and together with the Five Year Credit Agreement, the “Credit Agreements”) with Crédit Agricole, as the Administrative Agent, the syndication agents, the documentation agents, the lead arrangers and bookrunners named therein, and the lenders named therein, providing the Company with a $900 million senior unsecured revolving credit facility (the “Three Year Credit Facility,” and together with the Five Year Credit Facility, the “Credit Facilities”) for a three year term. The Company has the option to twice extend the three year term for one additional year, subject to satisfaction of customary conditions, for a maximum term of up to five years. The Three Year Credit Facility contains the requirement that all borrowings must be paid within 364 days and also includes a required thirty day Clean-Up Period during each fiscal year of the Company, with the timing of each Clean-Up Period to be at the Company’s discretion. The Three Year Credit Facility also contains an accordion-type feature, which allows the Company to propose up to a $100 million increase in the lenders’ commitments. Proceeds of the Three Year Credit Facility will be used by the Company for working capital, capital expenditures and other general corporate purposes.