Item 1.01. Entry Into a Material Definitive Agreement.
Brinker International, Inc. (the “Company”) and its wholly-owned subsidiaries, Brinker Restaurant Corporation, Brinker Texas, Inc., Brinker Florida, Inc., and Brinker International Payroll Company, L.P., each as a guarantor, entered into a Fifth Amendment to Credit Agreement (the “Fifth Amendment”) dated as of March 31, 2020 (the “Effective Date”), which amends its Credit Agreement dated as of March 12, 2015 (as heretofore amended, the “Existing Credit Agreement”; the Existing Credit Agreement as amended by the Fifth Amendment, the “Amended Credit Agreement”) with a group of banks for which Bank of America, N.A. is acting as administrative agent (the “Administrative Agent”). Capitalized terms not defined in this description shall have the meanings given them in the Existing Credit Agreement.
The Credit Agreement dated as of March 12, 2015 was more specifically described in Item 1.01 of the Company’s Current Report on Form 8-K, filed March 12, 2015, and the Existing Credit Agreement was more specifically described in Note 9 of the Company’s Quarterly Report on Form 10-Q, filed January 29, 2020, both of which descriptions are incorporated by reference.
Commencing with the Fifth Amendment until the date of delivery of the financials for the fiscal quarter ending September 23, 2020, the aggregate principal amount of borrowings outstanding under the Amended Credit Agreement shall be limited to a maximum of $800,000,000 and the interest rate shall be increased to LIBOR plus 1.95% (and the LIBOR floor was permanently increased to 0.75% from zero). During this period, the Company will also have supplemental reporting obligations to its banks and will be prohibited from making dividends, stock repurchases and investments. Following this interim period (subject to certain conditions) the Company shall be subject to a $50,000,000 aggregate limitation on dividends, stock repurchases and investments.
The Fifth Amendment also temporarily suspends and resets the financial covenants. The fixed charge coverage ratio is decreased to 1.00:1.00 for the fiscal quarter ending September 23, 2020, and to 1.25:1.00 for the fiscal quarter ending December 23, 2020. The leverage ratio covenant is suspended until the fiscal quarter ending September 23, 2020, at which point the covenant level is increased from 4.25:1.00 to 4.75:1.00.
The Fifth Amendment expands the collateral securing the loans under the Existing Credit Agreement, including, without limitation, intellectual property, but excluding any real estate or capital stock of or debt issued by any restricted subsidiary (as such term is defined in the Company’s notes). The Company is also required to provide additional subsidiary guarantees.
The foregoing is only a summary and it is qualified in its entirety by the specific terms of the Fifth Amendment. Several of the banks party to the Amended Credit Agreement provide various other banking services to the Company.