Item
1.01. Entry into a Material Definitive Agreement.
Spectrum
Brands, Inc. (“Spectrum Brands” or the “Company”) is pleased to announce that, as part of a series of precautionary
measures in response to the COVID-19 outbreak, it has further strengthened its liquidity position by amending (the “Amendment”)
its revolving credit facility and adding another $90 million dollar denominated tranche to its existing $800 million multi-currency
facility.
In
addition to the Amendment, and as another precautionary measure, the Company recently drew the full amount available at the time
under its then-existing US dollar and multi-currency facility. The full $90 million of the additional tranche remains available
and undrawn as of the date hereof.
With the availability
under this new tranche and the approximately $480 million of cash on hand, Spectrum Brands has approximately $570 million in current
liquidity. The Company believes that its strong balance sheet and substantial liquidity position provide it with meaningful financial
flexibility to navigate the current challenges resulting from the spread of COVID-19.
Summary
of the Amendment and Credit Agreement Terms
On
April 3, 2020, Spectrum Brands and SB/RH Holdings, LLC (“SB/RH Holdings”, which is the parent company of a Spectrum
Brands and the wholly-owned subsidiary of Spectrum Brands Holdings, Inc.), entered into the Amendment to the Credit Agreement,
dated as of June 23, 2015 (the “Credit Agreement”), by and among Spectrum Brands, SB/RH Holdings, Royal Bank
of Canada (as successor to Deutsche Bank AG, New York Branch), as the administrative agent,
and the lenders party thereto from time to time. The Amendment was the seventh amendment to the Credit Agreement.
The
Amendment modified certain terms of the Credit Agreement, including adding an additional $90 million dollar tranche (the “2020
Dollar Revolving Tranche”) to Spectrum Brands’ Revolving Facility (as defined below), increasing the aggregate commitments
under the Revolving Facility from $800 million to $890 million.
The
material terms of the Credit Agreement, after giving effect to the Amendment, are described below.
Facility
under the Credit Agreement
The
facility (the “Revolving Facility”) under the Credit Agreement consists of a $890 million revolving credit facility
(with two U.S. dollar tranches and a multicurrency tranche).
The
aggregate commitment amount with respect to (a) the existing U.S. dollar tranche of the Revolving Facility is $600 million,
(b) the multi-currency tranche of the Revolving Facility is $200 million and (c) the 2020 Dollar Revolving Tranche is $90
million. At April 3, 2020, after giving effect to the Amendment and the use of proceeds from borrowings incurred under the
Credit Agreement as of such date, the existing U.S. dollar tranche of the Revolving Facility and the multi-currency tranche
of the Revolving Facility were fully drawn and $90 million remains available under the 2020 Dollar Revolving Tranche. The
commitment fee rate will be equal to 0.35% of the unused commitments for the existing U.S. dollar tranche and the
multi-currency tranche of the of Revolving Facility, and 0.40% of the unused commitments for the 2020 Dollar Revolving
Tranche, each of which may be reduced by 0.05% based on achieving a certain total net leverage ratio specified in the Credit
Agreement.
Interest
Rate
All
outstanding amounts under the existing U.S. dollar tranche (if funded in U.S. dollars) will bear interest, at the option of Spectrum
Brands, at a rate per annum equal to (x) the LIBO rate, adjusted for statutory reserves, plus a margin ranging between 1.75% to
2.25% or (y) the Alternate Base Rate (as defined in the Credit Agreement), plus a margin ranging between 0.75% to 1.25%.
All
outstanding amounts under the 2020 Dollar Revolving Tranche will bear interest, at Spectrum’s option, at a rate per annum
equal to (x) the LIBO rate, adjusted for statutory reserves, plus a margin ranging between 2.00% to 2.50% or (y) the Alternate
Base Rate (as defined in the Credit Agreement), plus a margin ranging between 1.00% to 1.50%.
The
multi-currency tranche (if funded in Euros) will bear interest at a rate per annum equal to the EURIBOR Rate (as defined in the
Credit Agreement), plus a margin ranging between 1.75% to 2.75% per annum. The multi-currency tranche (if funded in Canadian dollars)
will bear interest, at Spectrum’s option, at a rate per annum equal to (x) the BA Rate (as defined in the Credit Agreement),
plus a margin ranging between 1.75% to 2.25% or (y) the Canadian Base Rate (as defined in the Credit Agreement), plus a margin
ranging between 0.75% to 1.25%.
The
margin in each of the foregoing is determined based on certain total net leverage ratios specified in the Credit Agreement.
Prepayment
Provisions
The
Credit Agreement does not contain any mandatory prepayment provisions with respect to the Revolving Credit Facility, except in
the event that the overall exposure exceeds the commitments under the Revolving Credit Facility.
Voluntary
prepayments of borrowings under the Credit Agreement are permitted at any time, in agreed-upon minimum principal amounts. Prepayments
are not subject to premium or penalty (except customary LIBOR breakage costs, if applicable).
Guarantees
and Security
Obligations
under the Credit Agreement and, at Spectrum Brands’ option, under certain interest rate protection or other hedging arrangements
and certain cash management arrangements (collectively, the “Secured Obligations”) are guaranteed by SB/RH Holdings
and the direct and indirect wholly-owned material domestic subsidiaries of SB/RH Holdings, other than Spectrum Brands (the “Subsidiary
Guarantors”), subject to certain exceptions, pursuant to the Loan Guaranty, dated as of June 23, 2015, by and among SB/RH
Holdings, the Subsidiary Guarantors party thereto from time to time and Royal Bank of Canada (as successor to Deutsche Bank
AG New York Branch), as administrative agent and collateral agent (the “Loan Guaranty”).
The
Secured Obligations are secured by first-priority liens on substantially all of the assets of Spectrum Brands and the Subsidiary
Guarantors and on the equity interests of Spectrum Brands directly held by SB/RH Holdings pursuant to the Security Agreement, dated
as of June 23, 2015, by and among Spectrum Brands, SB/RH Holdings, the Subsidiary Guarantors party thereto from time to time and
Royal Bank of Canada (as successor to Deutsche Bank AG New York Branch), as collateral agent (the “Security Agreement”).
Maturity
and Other
The
Revolving Facility will mature on March 6, 2022.
The
Credit Agreement contains customary affirmative and negative covenants, including, but not limited to, restrictions on Spectrum
Brands’ and its restricted subsidiaries’ ability to incur indebtedness, create liens, make investments, pay dividends
or make certain other distributions, and merge or consolidate or sell assets, in each case subject to certain exceptions set forth
in the Credit Agreement.
The
foregoing summary is not complete and is qualified entirely by reference to the full text of the applicable documents. The Credit
Agreement, the Amendments, the Loan Guaranty and the Security Agreement are each incorporated by reference herein as exhibits to
this report.