Item 1.01 Entry into a Material Definitive Agreement.
On August 2, 2022, Fortune Brands Home & Security, Inc. (the “Company”) entered into a five year unsecured revolving credit agreement among the Company, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”), which amended and restated its credit agreement, dated as of September 30, 2019.
Under the Credit Agreement, subject to the satisfaction or waiver of certain conditions, the Company will be able to borrow loans on a revolving basis and obtain letters of credit. The aggregate principal amount of commitments under the Credit Agreement will be $1,250,000,000 ($50,000,000 of which may be used for letters of credit). The proceeds of borrowings under the Credit Agreement may be used for general corporate purposes, including working capital, capital expenditures, permitted acquisitions and other lawful corporate purposes. The Credit Agreement is the liquidity backstop for the repayment of any notes issued under the Company’s commercial paper program.
The Company has the ability under the Credit Agreement to request two one year extensions of the maturity date and to seek incremental commitments and/or term loans of up to $750,000,000, subject in each case to the satisfaction or waiver of certain conditions.
Borrowings under the Credit Agreement will bear interest at variable rates equal to, at the Company’s election (1) for each base rate loan, the sum of the base rate plus the applicable base rate margin (2) for each adjusted term secured overnight financing rate (SOFR) loan, the sum of a term SOFR rate margin plus the adjusted term SOFR rate applicable for an interest period selected by the Company or (3) for each daily simple SOFR loan, the sum daily simple SOFR margin plus the adjusted daily simple SOFR rate. The applicable base rate margin and the adjusted term SOFR rate margin will be determined based on the ratings of the Company’s senior unsecured long-term debt securities. The base rate margins range from 0.0% to 0.425% and the adjusted term SOFR rate and daily simple SOFR rate margins range from 0.92% to 1.425%.
The Credit Agreement contains, among other things, conditions precedent, covenants, representations and warranties and events of default customary for facilities of this type. The covenants include certain limitations on secured debt, sale-leaseback transactions, subsidiary debt and guarantees, fundamental changes, acquisitions and transactions with affiliates. The Credit Agreement also includes a covenant under which the Company is required to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0. In addition, the Credit Agreement includes a covenant under which the Company's ratio of consolidated total indebtedness minus certain cash and cash equivalents held by the Company and its subsidiaries to consolidated EBITDA generally may not exceed 3.5 to 1.0.
Under certain conditions the lending commitments under the Credit Agreement may be terminated by the Lenders and amounts outstanding under the Credit Agreement may be accelerated. The events of default include: failure to pay any principal, interest or other amounts when due, failure to comply with its covenants, breach of representations or warranties in any material respect, non-payment or acceleration of other material debt of the Company and its subsidiaries, bankruptcy, material judgments rendered against the Company or certain of its subsidiaries, certain ERISA events or a change of control of the Company, subject to various exceptions and notice, cure and grace periods.
From time to time, the Company and the lenders under the Credit Agreement (or affiliates of the lenders) may engage in other transactions, including arrangements under which a lender or an affiliate of the lender participates in interest rate swap or hedging arrangements with the Company, effects repurchases of shares of the Company’s common stock, serves as underwriter, placement agent or purchaser of debt issued by the Company, acts as a dealer or purchaser of commercial paper issued by the Company, provides cash management, financial advisory, corporate trust, investment banking or commercial banking services to the Company, or provides lines of credit to the Company or its affiliates among other things.
The above summary 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, which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.
A copy of the Company’s press release in relation to the entry into the Credit Agreement dated August 3, 2022 is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.