Item 1.01
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Entry into a Material Definitive Agreement.
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On May 5, 2020, Tenneco Inc. (the “Company”), Tenneco Automotive Operating Company Inc. and certain other subsidiaries of the Company entered into the Third Amendment (the “Third Amendment”) to that certain Credit Agreement, dated October 1, 2018 (as amended, the “Credit Agreement”), by and among the Company and Tenneco Automotive Operating Company Inc., as borrowers, J.P. Morgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.
Pursuant to the Third Amendment, effective May 5, 2020, the Company modified its consolidated net leverage ratio and consolidated interest coverage ratio (collectively, the “Financial Covenants”) for the revolving credit facility and the term loan A facility under the Credit Agreement to:
(i) require a senior secured leverage ratio (as described in the Third Amendment) of not greater than 6.75 to 1 as of the end of the fiscal quarter ending June 30, 2020, 9.50 to 1 as of the end of the fiscal quarter ending September 30, 2020, 8.75 to 1 as of the end of the fiscal quarter ending December 31, 2020, 8.25 to 1 as of the end of the fiscal quarter ending March 31, 2021, 4.50 to 1 as of the end of the fiscal quarter ending June 30, 2021, 4.25 to 1 as of the end of the fiscal quarter ending September 30, 2021 and 4.00 to 1 as of the end of the fiscal quarter ending December 31, 2021;
(ii) require a maximum permitted consolidated net leverage ratio (as modified by the Third Amendment) of not greater than 4.50 to 1 as of the end of the fiscal quarter ending March 31, 2020, 5.25 to 1 as of the end of the fiscal quarter ending March 31, 2022, 4.75 to 1 as of the end of the fiscal quarter ending June 30, 2022, 4.25 to 1 as of the fiscal quarter ending September 30, 2022 and 3.75 to 1 as of the end of each fiscal quarter ending on or after December 31, 2022; and
(iii) require a minimum consolidated interest coverage ratio of not less than 2.75 to 1 as of the end of the fiscal quarter ending March 31, 2020, 2.00 to 1 as of the end of the fiscal quarter ending June 30, 2020, 1.50 to 1 as of the end of each fiscal quarter ending September 30, 2020 through March 31, 2021 and 2.75 to 1 as of the end of each fiscal quarter ending on or after June 30, 2021.
The above changes to the Financial Covenants are subject to several covenant reset triggers (“Covenant Reset Triggers”). The Covenant Reset Triggers limit certain activities of the Company by tightening various affirmative and negative covenants, each as more specifically described in the Third Amendment. If a Covenant Reset Trigger occurs, the Financial Covenants under the Credit Agreement revert back to the Financial Covenants in effect immediately prior to the effectiveness of the Third Amendment (which are described in the Third Amendment) (the “Prior Financial Covenants”). The Company may make a one-time election to revert back to the Prior Financial Covenants and terminate the Covenant Reset Triggers upon delivery of a covenant reset certificate that attests to compliance with the Prior Financial Covenants as of the end of the relevant fiscal period.
One of the Covenant Reset Triggers is a failure to determine the interest rate pursuant to a revised pricing grid attached to the Third Amendment, which provides for an increase in the applicable margin with respect to the revolving credit facility and the term loan A facility.
The foregoing summary of the Third Amendment is qualified in its entirety by reference to the full text of such amendment set forth in Exhibit 10.1 to this Current Report on Form 8-K, and which is incorporated by reference into this Item 1.01.