Item 1.01. Entry into a Material Definitive Agreement.
On November 5, 2019, The ServiceMaster Company,
LLC (“SvM”), an indirect wholly-owned subsidiary of ServiceMaster Global Holdings, Inc., entered into a fourth amendment
(the “Fourth Amendment”) to SvM’s existing credit agreement, dated as of July 1, 2014 (the “Existing Credit
Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and issuing bank, the lenders and
other financial institutions party thereto, CDRSVM Holding, LLC and certain subsidiaries of SvM party thereto as guarantors. The
Fourth Amendment amended and restated the Existing Credit Agreement (the “Fourth Amended and Restated Credit Agreement”)
pursuant to which SvM entered into:
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a $600 million term loan facility maturing 2026 (the “Amended Term Loan Facility”); and
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a $400 million revolving credit facility maturing 2024 (the “Amended Revolving Credit Facility” and, together with
the Amended Term Loan Facility, the ‘‘Amended Credit Facilities”).
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SvM used the net proceeds from the Amended
Term Loan Facility to repay approximately $171 million of debt outstanding under its previous Term Loan B due 2023, $120 million
outstanding under its previous revolving credit facility due 2021, as well as $150 million from a recent short-term borrowing entered
on October 4, 2019, and to pay related fees and expenses.
Maturity; Prepayments
The Amended Term Loan Facility will mature
on November 5, 2026. Principal repayments of 1% per annum will be payable quarterly with the balance due at maturity. The Amended
Revolving Credit Facility will mature on November 5, 2024.
Subject to certain exceptions, the Amended
Term Loan Facility is subject to mandatory prepayment and reduction in an amount equal to:
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the net cash proceeds of certain specified asset sales or dispositions by SvM and its restricted subsidiaries; and
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50% of annual excess cash flow (as defined in the Fourth Amended and Restated Credit Agreement) for any fiscal year unless
a certain first lien leverage ratio target is met.
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SvM may prepay term loans under the Amended
Term Loan Facility at any time and from time to time, in whole or in part, without premium or penalty, unless such prepayment is
in connection with a repricing transaction (as defined in the Fourth Amended and Restated Credit Agreement) on or prior to the
6-month anniversary of the closing date of the Amended Credit Facilities, in which case a 1.0% premium shall be required to be
paid.
Voluntary reductions of revolving loan commitments
under the Amended Revolving Credit Facility are permitted from time to time, without premium or penalty.
Guarantees; Security
CDRSVM Holding, LLC, the direct parent
of SvM, and certain direct and indirect domestic subsidiaries of SvM guarantee SvM’s
obligations under the Amended Credit Facilities. The Amended Credit Facilities and the guarantees thereof are secured by
substantially all of the tangible and intangible assets of SvM and the guarantors (including pledges of all the capital stock
of all direct domestic subsidiaries (other than foreign subsidiary holding companies, which are deemed to be foreign
subsidiaries) owned by SvM or any guarantor and of up to 65% of the capital stock of each direct foreign subsidiary owned by
SvM or any guarantor), subject to certain exceptions, including but not limited to exceptions for equity interests,
indebtedness or other obligations of subsidiaries, real estate or any other assets if the granting of a security interest
therein would require that SvM’s 7.45% notes due August 15, 2027 and 7.25% notes due March 1, 2038 be secured.
Interest; Fees
The interest rates applicable to the loans
under the Amended Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at the borrower’s
option, (i) an adjusted London inter-bank offered rate (“LIBOR”) plus 1.75% per annum, or (ii) an alternate base rate
(“ABR”) plus 0.75% per annum.
In connection with entering into the Amended
Term Loan Facility, SvM entered into $550 million of interest rate swaps under the Amended Term Loan Facility, fixed at 3.365%.
The interest rates applicable to the loans
under the Amended Revolving Credit Facility are based on a fluctuating rate of interest measured by reference to either, at the
borrower’s option, (a) if SvM has a consolidated total leverage ratio (as defined in the Fourth Amended and Restated Credit
Agreement) above 2.50 (i) an adjusted LIBOR plus 1.75% per annum, or (ii) ABR plus 0.75% per annum and (b) if SvM has a consolidated
total leverage ratio at or below 2.50 (i) an adjusted LIBOR plus 1.50% per annum, or (ii) ABR plus 0.50% per annum.
Covenants
The Amended Credit Facilities contain a
number of covenants that, among other things, limit or restrict the ability of SvM and its material restricted subsidiaries to
dispose of certain assets, incur or guarantee additional indebtedness, make dividends and other restricted payments (including
redemption of our stock, prepayments of subordinated obligations and making investments), incur or maintain liens or engage in
certain transactions with affiliates. The Amended Credit Facilities also restrict the ability of SvM to engage in mergers or the
sale of substantially all of its assets.
Events of Default
The Amended Credit Facilities contain a
number of events of default including non-payment of principal, interest or fees, violation of covenants, material inaccuracy of
representations or warranties, cross payment default and cross acceleration to certain other material indebtedness, certain bankruptcy
events, certain ERISA events, material invalidity of guarantees, security interests or, to the extent applicable, intercreditor
arrangements, material judgments and change of control.
The foregoing description of Amended Credit
Facilities is qualified in its entirety by reference to the complete terms and conditions of the Fourth Amended and Restated Credit
Agreement included in the Fourth Amendment, filed as Exhibit 10.1 hereto and incorporated herein by reference.