Dean Foods Company (NYSE:DF) Files An 8-K Entry into a Material Definitive Agreement

Dean Foods Company (NYSE:DF) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement

Senior Secured Borrowing Base Revolving Credit Facility

On February22, 2019, Dean Foods Company, a Delaware corporation (the “Company”), entered into that certain Credit Agreement, by and among the Company, Coöperatieve Rabobank U.A., New York Branch, as administrative agent, and the lenders party thereto (the “Credit Agreement”), to which the lenders party thereto have provided the Company with a senior secured borrowing base revolving credit facility with a maximum facility amount of $265 million (the “Credit Facility”). In connection with entry into the Credit Agreement, the Company terminated the 2015 Credit Agreement (as defined below).

Borrowings under the Credit Facility are limited to the lower of the maximum facility amount and borrowing base availability. The borrowing base availability amount is equal to (i)on and following February22, 2019 and prior to the date on which certain conditions relating to the grant of security interest in certain of the Company’s inventory and real property and the Company’s election to include such inventory and real property in the borrowing base, $175 million and (ii)on such date and at any time thereafter, 65% of the value of such inventory and real property at the applicable time. The Credit Facility matures on February22, 2024, with a September15, 2022 springing maturity date in the event the Company’s 6.50% Senior Notes due 2023 (the “2023 Notes”) have not been refinanced or repaid on or prior to July15, 2022. A portion of the Credit Facility is available for the issuance of up to $25 million of standby letters of credit and the borrowings of up to $10 million of swing line loans.

Loans outstanding under the Credit Facility bear interest, at the Company’s option, at either: (i)the Base Rate (as defined in the Credit Agreement) or (ii)the Adjusted Eurodollar Rate (as defined in the Credit Agreement), plus a margin ranging between 1.25% and 1.75% (in the case of Base Rate loans) or 2.25% and 2.75% (in the case of Eurodollar Rate loans), in each case based on the Company’s total net leverage ratio at such time.

The Company may make optional prepayments of the loans, in whole or in part, without penalty (other than applicable breakage and redeployment costs). Subject to certain exceptions and conditions described in the Credit Agreement, the Company will be obligated to prepay the Credit Facility with the net cash proceeds of certain asset sales and with casualty insurance proceeds. The commitments under the Credit Facility will be reduced by an amount equal to 50% of the required prepayment amount in the event assets generating net proceeds in excess of $75 million not included in the borrowing base are sold in any fiscal year. The Credit Facility is guaranteed by the Company’s existing and future wholly owned material domestic subsidiaries, which are substantially all of the Company’s existing domestic subsidiaries other than the subsidiaries that are sellers under the Receivables Securitization Facility (as defined below).

The Credit Agreement contains customary representations, warranties and covenants, including, but not limited to specified restrictions on incurrences of indebtedness, liens and guarantee obligations, mergers, acquisitions, consolidations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary prepayments of the 2023 Notes, investments, loans and advances, transactions with affiliates and sale and leaseback transactions. The Credit Agreement also contains customary events of default and related cure provisions. The Credit Agreement includes a springing fixed charge covenant that requires the Company to maintain a fixed charge coverage ratio of at least 1.05:1.00 at any time that the Company’s liquidity (defined to include available commitments under the Credit Facility and unrestricted cash on hand and/or cash restricted in favor of the lenders in an aggregate amount of up to $25 million for all such cash) at such time is less than 50% of the borrowing base under the Credit Facility (or, at any time prior to inclusion of certain inventory and real property, less than $100 million).

Receivables Securitization Facility

On February22, 2019, the Company entered into an amended and restated receivables purchase agreement (the “Receivables Purchase Agreement”), which provides the Company with a $450 million receivables securitization facility (the “Receivables Securitization Facility”), to which certain of the Company’s subsidiaries sell their accounts receivable to two wholly-owned entities intended to be bankruptcy-remote. The entities then transfer the receivables to third-party asset-backed commercial paper conduits sponsored by major financial institutions. The assets and liabilities of these two entities are fully reflected in the Company’s Consolidated Balance Sheets, and the securitization is treated as a borrowing for accounting purposes.

The Receivables Securitization Facility has a maturity date of February22, 2022. The Receivables Securitization Facility contains customary representations, warranties and covenants, including, but not limited to specified restrictions on incurrences of liens and payments of subordinated indebtedness. Advances outstanding under the Receivables Securitization Facility will bear interest between 1.05% and 1.45% per annum, and the Company will pay an unused fee between 0.40% and 0.50% per annum on undrawn amounts, in each case based on the Company’s total net leverage ratio.