Aramark (NYSE:ARMK) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
| Entry into a Material Definitive Agreement. |
Senior Secured Credit Facilities
On March28, 2017 (the Closing Date), Aramark Services, Inc. (the
Company), an indirect wholly owned subsidiary of Aramark
(Parent), Aramark Intermediate HoldCo Corporation, ARAMARK Canada
Ltd., ARAMARK Investments Limited, ARAMARK Ireland Holdings
Limited, ARAMARK Regional Treasury Europe, Designated Activity
Company, ARAMARK Holdings GmbH Co. KG, Aramark International
Finance S. r.l. and certain wholly-owned domestic subsidiaries of
the Company entered into a credit agreement (the New Senior
Secured Credit Agreement) with the financial institutions from
time to time party thereto (the Lenders), the issuing banks named
therein, JPMorgan Chase Bank, N.A., as administrative agent for
the Lenders and collateral agent for the secured parties
thereunder.
The New Senior Secured Credit Agreement provides for senior
secured credit facilities (the Senior Secured Credit Facilities)
in the aggregate principal amount of $3,600.0million comprising
of (a)term loan facilities consisting of a U.S. dollar
denominated term A loan to the Company in an amount of
$650.0million (due in 2022), a Canadian dollar denominated term A
loan to Aramark Canada Ltd. in an amount equal C$133.4million
(due in 2022), a U.S. dollar denominated term B loan to the
Company in the amount of $1,750.0million (due in 2024) and a Yen
denominated term C loan to the Company in an amount equal to
11,107million (due in 2022) and (b)a revolving credit facility of
up to $1,000.0million with borrowings to the Company and certain
of the Companys foreign subsidiaries available in U.S. dollars,
Canadian dollars, Euros and Pounds Sterling, which includes
capacity for $250.0million of letters of credit. The revolving
credit facility matures in 2022. The term loan facilities were
funded in full on the Closing Date and $71.0 million under the
revolving credit facility was drawn on the Closing Date.
The Company used the borrowings under the Senior Secured Credit
Facilities, a portion of the net proceeds from the offering of
the Dollar Notes, as described below, and a portion of the net
proceeds from the offering of the Euro Notes, as described below,
to repay all existing term loan facilities under the Companys
existing senior secured credit facilities and to pay related fees
and expenses.
The Senior Secured Credit Facilities provide that the borrowers
have the right at any time to request up to (i) $1,400.0million,
plus (ii)the aggregate U.S. dollar equivalent of all voluntary
prepayments of term loan facilities and borrowings under the
revolving credit facilities (to the extent the revolving
commitments are permanently reduced), other than prepayments
funded with long-term indebtedness (other than borrowings under
the revolving credit facility), plus (iii)an unlimited amount
subject to pro forma compliance with a maximum consolidated
secured leverage ratio of 3.00 to 1.00, of incremental
commitments in the aggregate under one or more incremental term
loan facilities or increases under existing term loan facilities
and/or additional revolving credit facilities or increases under
the existing revolving credit facility. The Lenders are not under
any obligation to provide any such incremental facilities or
commitments, and any such addition of or increase in facilities
or commitments are subject to customary conditions precedent.
Borrowings under the New Senior Secured Credit Agreement bear
interest at a rate equal to an applicable margin plus, at the
applicable borrowers option, (a)with respect to borrowings
denominated in U.S. dollars, Euro, Pounds Sterling and Yen, a
LIBOR rate determined by reference to the costs of funds for
deposits in the currency of such borrowing for the interest
period relevant to such borrowing, subject to a floor of 0%,
adjusted for certain additional costs, (b)with respect to
borrowings denominated in U.S. dollars, a base rate determined by
reference to the highest of (1)the prime rate of the
administrative agent, (2)the federal funds rate plus 0.50% and
(3)the one-month LIBOR rate plus 1.00% or (c)with respect to
borrowings denominated in Canadian dollars, (1)a base rate
determined by reference, subject to a floor of 0%, to the higher
of (x)the prime rate announced by the administrative agent or
(y)the one-month bankers acceptance rate plus 1.00% or (2)a
bankers acceptance rate determined by reference to the rate
offered for bankers acceptances in Canadian dollars for the
interest period relevant to such borrowing, subject to a floor of
0%.
The initial applicable margin spread for U.S. dollar borrowings
under the U.S. dollar denominated term A loan facility is 1.75%
per annum for eurocurrency (LIBOR) borrowings and 0.75% per annum
for base rate
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borrowings. The initial applicable margin spread for borrowings
under the Canadian dollar denominated term A loan facility is
1.75% per annum for bankers acceptance rate borrowings and 0.75%
per annum for base rate borrowings. The initial applicable margin
spread for borrowings under the U.S. dollar denominated term B
loan facility is 2.00% for eurocurrency (LIBOR) borrowings and
1.00% per annum for base rate borrowings. The applicable margin
spread under the Yen denominated term C loan facility is 1.75%
per annum. The initial applicable margin spread for borrowings
under the revolving credit facility is 1.75% per annum for
eurocurrency (LIBOR) and bankers acceptance rate borrowings and
0.75% per annum for base rate borrowings.
The Company is required to pay a commitment fee to the lenders
under the revolving credit facility in respect of the unutilized
commitments thereunder. The initial commitment fee rate is 0.30%
per annum. The applicable margin spread with respect to the U.S.
dollar and Canadian dollar borrowings under the term A loan
facility and U.S. dollar borrowings under the term B loan
facility and the applicable margin spread and commitment fee in
respect of the revolving credit facility shall be subject to
change based on the Companys consolidated leverage ratio
commencing with delivery of the financial statements for the
fiscal quarter ending June30, 2017.
The term loan facilities require the Company to prepay (or cause
to prepay) outstanding term loans, subject to certain exceptions
with (i) 50% of the Companys annual excess cash flow (as defined
in the New Senior Secured Credit Agreement) with stepdowns to 25%
and 0% upon the Companys reaching certain consolidated secured
leverage ratio thresholds; provided, that any voluntary
prepayments of the term loan facilities and borrowings under the
revolving credit facilities (to the extent the revolving
commitments are permanently reduced), other than prepayments
funded with long-term indebtedness (other than borrowings under
the revolving credit facility), shall be credited against excess
cash flow prepayment obligations on a dollar-for-dollar basis;
provided, further, that such prepayment shall only be required to
the extent excess cash flow for the applicable fiscal year
exceeds $10.0million; (ii) 50% of the net cash proceeds of all
non-ordinary course asset sales or other dispositions of property
subject to certain exceptions and customary reinvestment rights;
provided, further, that such prepayment shall only be required to
the extent proceeds of such assets sales or other dispositions
exceed $100.0million; and (iii) 50% of the net cash proceeds of
any incurrence of debt, but excluding proceeds from certain debt
permitted under the New Senior Secured Credit Agreement.
The Company may
voluntarily repay outstanding loans under the Senior Secured
Credit Facilities at any time without premium or penalty, other
than (i)customary breakage costs with respect to LIBOR loans and
(ii)with respect to any voluntary prepayments of the term B loan
facility in connection with any repricing transaction (as defined
in the New Senior Secured Credit Agreement) made within six
months after the Closing Date, a 1% prepayment premium. Prepaid
term loans may not be reborrowed.
The Company is
required to repay installments on the loans under the term B loan
facility in quarterly principal amounts of 1.00% per annum of
their funded total principal amount. The applicable borrowers are
required to repay installments on the loans under the U.S. dollar
denominated and Canadian dollar denominated term A loan
facilities and Yen denominated term C loan facility in quarterly
principal amounts of 5.00%, 5.00%, 7.5%, 10.0% and 15.0% per
annum of their funded total principal amount in the first,
second, third, fourth and fifth years after the Closing Date,
respectively.
All obligations
under the Senior Secured Credit Facilities are unconditionally
guaranteed by Aramark Intermediate HoldCo Corporation and,
subject to certain exceptions, substantially all of the Companys
existing and future wholly-owned domestic subsidiaries (excluding
certain immaterial subsidiaries, receivables facility
subsidiaries, certain other customarily excluded subsidiaries and
certain subsidiaries designated under the New Senior Secured
Credit Agreement as unrestricted subsidiaries) (collectively, the
U.S. Subsidiary Guarantors). All obligations under the Senior
Secured Credit Facilities, and the guarantees of those
obligations, are secured by (i)a pledge of 50% of the capital
stock of the Company, (ii)pledges of 50% of the capital stock (or
65% of voting stock and 50% of non-voting stock, in the case of
the stock of foreign subsidiaries) held by the Company, Aramark
Intermediate HoldCo Corporation or any of the U.S. Subsidiary
Guarantors and (iii)a security interest in, and mortgages on,
substantially all tangible assets (subject to customary
exceptions) of Aramark Intermediate HoldCo Corporation, the
Company or any of the U.S. Subsidiary Guarantors. Parent is not a
guarantor under the Senior Secured Credit Facilities and is not
subject to the covenants or obligations under the New Senior
Secured Credit Agreement.
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The New Senior
Secured Credit Agreement contains certain covenants that, among
other things, restrict, subject to certain exceptions, the
Companys ability and the ability of its restricted subsidiaries
to: incur additional indebtedness, issue preferred stock or
provide guarantees; create liens on assets; engage in mergers or
consolidations; sell assets; pay dividends, make distributions or
repurchase its capital stock; make investments, loans or
advances; repay or repurchase subordinated debt; create
restrictions on the payment of dividends or other transfers to
the Company from its restricted subsidiaries; make certain
acquisitions; engage in certain transactions with affiliates;
amend material agreements governing the Companys subordinated
debt; and fundamentally change the Companys business.
In addition, the
New Senior Secured Credit Agreement requires, so long as any of
the term A loan facilities and the revolving credit facility is
outstanding, the Company to maintain a maximum consolidated
secured leverage ratio of 5.125:1.00 that will be tested at the
end of each fiscal quarter with respect to the most recently
completed four consecutive fiscal quarters of the Company.
The New Senior
Secured Credit Agreement also requires certain customary
affirmative covenants, such as financial and other reporting
requirements.
The New Senior
Secured Credit Agreement contains certain customary events of
default (including an event of default upon a change of control).
Upon an event of default, the Senior Secured Credit Facilities
may be accelerated, in which case the borrowers will be required
to repay all outstanding loans plus accrued and unpaid interest
and all other amounts outstanding under the Senior Secured Credit
Facilities.
Dollar
Notes Offering
On March22, 2017,
the Company issued $600.0million aggregate principal amount of
5.000% Senior Notes due 2025 (the Dollar Notes). The Dollar Notes
were issued to the indenture, dated as of March22, 2017 (the
Dollar Notes Indenture), among the Company, Parent, the
subsidiary guarantors named therein and The Bank of New York
Mellon, as trustee. A portion of the net proceeds from the
offering of the Dollar Notes was used to redeem the entire
outstanding aggregate principal amount of the 2020 Notes (as
defined below) and the remainder of the net proceeds from the
offering of the Dollar Notes was used, together with the net
proceeds from the offering of the Euro Notes, as described below,
and borrowings under the Senior Secured Credit Facilities, as
described above, to repay outstanding term loans under the
Companys existing senior secured credit agreement and to pay
certain related fees and expenses.
The Dollar Notes
are senior unsecured obligations of the Company. The Dollar Notes
rank equal in right of payment to all of the Companys existing
and future senior debt and rank senior in right of payment to all
of the Companys existing and future debt that is expressly
subordinated in right of payment to the Dollar Notes.
The Dollar Notes
are unconditionally guaranteed on a senior unsecured basis by
each wholly owned domestic subsidiary of the Company that
guarantees the Senior Secured Credit Facilities and the Companys
5.125% Senior Notes due 2024 and 4.750% Senior Notes due 2026
(together, the Existing Notes) and the Euro Notes (each a Dollar
Notes Guarantor and each such guarantee a Dollar Notes
Guarantee). Each Dollar Notes Guarantee ranks equal in right of
payment to all of the senior obligations of such Dollar Notes
Guarantor and will rank senior in right of payment to all of such
Dollar Notes Guarantors obligations that are expressly
subordinated in right of payment to the Dollar Notes. The Dollar
Notes are also guaranteed on a senior unsecured basis by Parent
for purposes of financial reporting.
The Dollar Notes
and the Dollar Notes Guarantees are effectively subordinated to
the Companys existing and future secured debt and that of the
Dollar Notes Guarantors, including all indebtedness under the
Senior Secured Credit Facilities, to the extent of the value of
the assets securing that indebtedness. The Dollar Notes and the
Dollar Notes Guarantees are structurally subordinated to all
liabilities of any of the Companys subsidiaries that do not
guarantee the Dollar Notes.
Interest on the
Dollar Notes will be payable on April1 and October1 of each year,
commencing on October1, 2017. Interest on the Dollar Notes
accrues from March22, 2017. Interest on the Dollar Notes will be
calculated on the basis of a 360-day year of twelve 30-day
months. The Dollar Notes mature on April1, 2025.
Prior to April1,
2020, the Company may redeem all or a portion of the Dollar Notes
at a price equal to 50% of the principal amount of the Dollar
Notes redeemed plus a make whole premium and accrued and unpaid
interest, if any, to but not including the redemption date. At
any time on or after April1, 2020, the Company has the option to
redeem all or a portion of the Dollar Notes at any time at the
redemption prices set forth in the Dollar Notes Indenture.
In addition, prior
to April1, 2020, the Company may redeem up to 40% of the
aggregate principal amount of the Dollar Notes with the proceeds
from one or more qualified equity offerings at a price equal to
105.000% of the principal amount of the Dollar Notes redeemed,
plus accrued and unpaid interest, if any, thereon to but not
including the redemption date.
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In the event of
certain types of changes of control, the holders of the Dollar
Notes may require the Company to purchase for cash all or a
portion of their Dollar Notes at a purchase price equal to 101%
of the principal amount of such Dollar Notes, plus accrued and
unpaid interest, if any, to the purchase date.
If the Company or
its restricted subsidiaries sell assets under certain
circumstances, the Company will be required to make an offer to
purchase the Dollar Notes at a purchase price equal to 50% of the
principal amount of such Dollar Notes, plus accrued and unpaid
interest, if any, to the purchase date.
In addition, the
Dollar Notes Indenture contains covenants limiting the Companys
ability and the ability of its restricted subsidiaries to:
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incur additional indebtedness or issue certain preferred shares; |
|
pay dividends and make certain distributions, investments and other restricted payments; |
| create certain liens; |
| sell assets; |
| enter into transactions with affiliates; |
|
create or allow any restriction on the ability of restricted subsidiaries to make payments to the Company; |
| enter into sale and leaseback transactions; |
|
merge, consolidate, sell or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis; and |
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designate the Companys subsidiaries as unrestricted subsidiaries. |
Parent will not be
subject to the covenants that apply to the Company or its
restricted subsidiaries under the Dollar Notes Indenture.
The Dollar Notes
Indenture also provides for events of default which, if any of
them occurs, would permit or require the principal of and accrued
interest on the Dollar Notes to become or to be declared due and
payable.
The foregoing
description of the Dollar Notes Indenture does not purport to be
complete and is qualified in its entirety by reference to the
full text of the Dollar Notes Indenture, which is filed as
Exhibit 4.1 hereto and is incorporated herein by
reference.
Euro
Notes Offering
On March27, 2017,
Aramark International Finance S. r.l., an indirect wholly owned
subsidiary of Parent and the Company (Aramark International),
issued 325.0million aggregate principal amount of its 3.125%
Senior Notes due 2025 (the Euro Notes). The Euro Notes were
issued to the indenture, dated as of March27, 2017 (the Euro
Notes Indenture), among Aramark International, Parent, the
Company, the subsidiary guarantors named therein, The Bank of New
York Mellon, as trustee and registrar, and The Bank of New York
Mellon, London Branch, as paying agent and transfer agent. The
net proceeds from the offering of the Euro Notes, together with
borrowings under the Senior Secured Credit Facilities, as
described above, and a portion of the net proceeds from the
offering of the Dollar Notes, as described above, were used to
repay outstanding term loans under the Companys existing senior
secured credit agreement and to pay certain related fees and
expenses.
The Euro Notes are
senior unsecured obligations of Aramark International. The Euro
Notes rank equal in right of payment to all of Aramark
Internationals existing and future senior debt and rank senior in
right of payment to all of Aramark Internationals future debt
that is expressly subordinated in right of payment to the Euro
Notes.
The Euro Notes are
unconditionally guaranteed on a senior unsecured basis by the
Company and each wholly owned domestic subsidiary of the Company
that guarantees the Senior Secured Credit Facilities, the
Existing Notes and the Dollar Notes (each, a Euro Notes Guarantor
and each such guarantee, a Euro Notes Guarantee). Each Euro Notes
Guarantee ranks equal in right of payment to all of the senior
obligations of such Euro Notes Guarantor and will rank senior in
right of payment to all of such Euro Notes Guarantors obligations
that are expressly subordinated in right of payment to the Euro
Notes. The Euro Notes are also guaranteed on a senior unsecured
basis by Parent for purposes of financial reporting.
The Euro Notes and
the Euro Notes Guarantees are effectively subordinated to Aramark
Internationals existing and future secured debt and that of the
Euro Notes Guarantors, including all indebtedness under the
Senior Secured Credit Facilities, to the extent of the value of
the assets securing that indebtedness. The Euro Notes and the
Euro Notes Guarantees are structurally subordinated to all
liabilities of any of the Companys subsidiaries that do not
guarantee the Euro Notes.
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Interest on the
Euro Notes will be payable on April1 and October1 of each year,
commencing on October1, 2017. Interest on the Euro Notes accrues
from March27, 2017. Interest on the Euro Notes will be calculated
on the basis of a 360-day year of twelve 30-day months. The Euro Notes
mature on April1, 2025.
Prior to April1, 2020, Aramark
International may redeem all or a portion of the Euro Notes at a
price equal to 50% of the principal amount of the Euro Notes
redeemed plus a make whole premium and accrued and unpaid
interest, if any, to but not including the redemption date. At
any time on or after April1, 2020, Aramark International has the
option to redeem all or a portion of the Euro Notes at any time
at the redemption prices set forth in the Euro Notes
Indenture.
In addition, prior to April1,
2020, Aramark International may redeem up to 40% of the aggregate
principal amount of the Euro Notes with the proceeds from one or
more qualified equity offerings of the Company at a price equal
to 103.125% of the principal amount of the Euro Notes redeemed,
plus accrued and unpaid interest, if any, thereon to but not
including the redemption date.
Except as required by law,
Aramark International will make payments on the Euro Notes free
of withholding or deduction for taxes. If withholding or
deduction is required, Aramark International will, subject to
certain customary exceptions, be required to pay additional
amounts so that the net amounts holders of the Euro Notes receive
will equal the amounts holders of the Euro Notes would have
received if withholding or deduction had not been imposed. If, as
a result of a change in law, Aramark International is required to
pay such additional amounts, Aramark International may redeem the
Euro Notes in whole but not in part, at any time at 50% of their
principal amount, plus accrued and unpaid interest, if any,
thereon to but not including the redemption date.
In the event of certain types
of changes of control, the holders of the Euro Notes may require
Aramark International to purchase for cash all or a portion of
their Euro Notes at a purchase price equal to 101% of the
principal amount of such Euro Notes, plus accrued and unpaid
interest, if any, to the purchase date.
If the Company or its
restricted subsidiaries sell assets under certain circumstances,
Aramark International will be required to make an offer to
purchase the Euro Notes at a purchase price equal to 50% of the
principal amount of such Euro Notes, plus accrued and unpaid
interest, if any, to the purchase date.
In addition, the Euro Notes
Indenture contains covenants limiting the Companys ability and
the ability of its restricted subsidiaries to undertake certain
specified actions and events of default that are substantially
the same as those set forth in the Dollar Notes Indenture, as
described above. Parent will not be subject to the covenants that
apply to the Company or its restricted subsidiaries under the
Euro Notes Indenture.
The foregoing description of
the Euro Notes Indenture does not purport to be complete and is
qualified in its entirety by reference to the full text of the
Euro Notes Indenture, which is filed as Exhibit 4.2 hereto and is
incorporated herein by reference.
| Item1.02. |
Termination of a Material Definitive Agreement. |
The information set forth in
Item 1.01 is incorporated by reference in this Item
1.02.
Repayment and
Termination of Existing Senior Secured Credit
Facility
On the Closing Date, the
Company repaid all outstanding borrowings under the existing
senior secured credit agreement and terminated the existing
senior secured credit agreement, which was replaced with the New
Senior Secured Credit Agreement as described above in Item 1.01.
The existing senior secured credit agreement provided for
revolving commitments of $730.0 million maturing in 2019, as well
as term loans, with an aggregate principal amount of
approximately $3,293.5 million outstanding as of the Closing
Date, maturing over a period ending on 2019 and
2021.
Redemption of 2020
Notes
The Company previously issued
a notice of conditional redemption to the indenture, dated as of
March7, 2013, as supplemented, among the Company, the guarantors
party thereto and The Bank of New York Mellon, as trustee,
relating to the Companys 5.75% Senior Notes due 2020 (the 2020
Notes) to redeem (the Redemption) the entire $228.8million
aggregate principal amount of the 2020 Notes currently
outstanding at a redemption price of 101.438% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption. The Redemption was conditioned
upon consummation of refinancing transactions by the Company,
which would result in the incurrence of indebtedness yielding net
proceeds that were sufficient to pay the redemption price. On
March23, 2017, following the consummation of the offering of the
Dollar Notes, the Company deposited with the trustee of the 2020
Notes the redemption payment to fund the Redemption and redeemed
all of the outstanding 2020 Notes.
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| Item2.03. |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in
Item 1.01 is incorporated by reference into this Item
2.03.
| Item9.01. | Financial Statements and Exhibits. |
(d)
Exhibits
|
Exhibit No. |
Description |
|
| 4.1 |
Indenture, dated as of March22, 2017, among Aramark Services, Inc., as issuer, Aramark, as parent guarantor, the subsidiary guarantors named therein and The Bank of New York Mellon, as trustee. |
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| 4.2 |
Indenture, dated as of March27, 2017, among Aramark International Finance S. r.l., as issuer, Aramark, as parent guarantor, Aramark Services, Inc., the subsidiary guarantors named therein, The Bank of New York Mellon, as trustee and registrar, and The Bank of New York Mellon, London Branch, as paying agent and transfer agent. |
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About Aramark (NYSE:ARMK)
Aramark is a global provider of food, facilities and uniform services to education, healthcare, business and industry, and sports, leisure and corrections clients. The Company operates through three segments: Food and Support Services North America (FSS North America), Food and Support Services International (FSS International), and Uniform and Career Apparel (Uniform). FSS North America and FSS International segments include food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure and other facilities. The Uniform segment includes rental, sale, cleaning, maintenance and delivery of personalized uniforms and other textile items to clients in a range of industries in the United States, Puerto Rico, Japan and Canada, including manufacturing, transportation, construction, restaurants and hotels, healthcare and pharmaceutical industries. Aramark (NYSE:ARMK) Recent Trading Information
Aramark (NYSE:ARMK) closed its last trading session up +0.33 at 36.82 with 771,548 shares trading hands.