STAPLES, INC. (NASDAQ:SPLS) Files An 8-K Entry into a Material Definitive Agreement

On November 22, 2016, Staples, Inc. entered into a Credit Agreement (the “New Credit Agreement”) with Bank of America, N.A, as Administrative Agent and the other lending institutions named therein. The New Credit Agreement replaces the Credit Agreement dated as of May 31, 2013, by and among Bank of America, N.A., as Administrative Agent and the other lending institutions named therein, which provided for a maximum borrowing of $1.0 billion and was due to expire in May 2018 (the “Prior Agreement”). As of November 22, 2016, no borrowings were outstanding under the Prior Agreement.

The New Credit Agreement provides for a maximum borrowing of $1.0 billion in U.S. Dollars and alternative currencies, and contains an accordion feature under which, upon Staples’ request and with the agreement of the lenders participating in the increase, Staples may increase the borrowing limit to $1.5 billion. Borrowings made to the New Credit Agreement may be syndicated loans, swing line loans, or letters of credit, the combined sum of which may not exceed the maximum borrowing amount. Amounts borrowed under the New Credit Agreement may be borrowed, repaid, and reborrowed from time to time until November 22, 2021, which maturity date may be extended up to November 22, 2023 in accordance with the terms of the New Credit Agreement.

Borrowings made to the New Credit Agreement as syndicated loans will bear interest at a rate equal to (i) the Eurocurrency Rate (which is LIBOR with a 0.000% floor, except in the case of non-LIBOR denominated currencies, for which the rate will be the relevant published reference rate as determined in accordance with the New Credit Agreement) plus a percentage spread ranging from 0.900% to 1.500% based on Staples’ credit rating, or (ii) the base rate (determined as the highest of (a) Bank of America’s prime rate, (b) the Federal Funds rate plus 0.50% and (c) the one month LIBOR rate plus 1.00%) plus a percentage spread ranging from 0.000% to 0.500% based on Staples’ credit rating. Each swing line loan will bear interest at the base rate plus a percentage spread ranging from 0.000% to 0.500% based on Staples’ credit rating. Staples will pay a fee ranging from 0.900% to 1.500% for letters of credit depending on the type of letter of credit and Staples’ credit rating. Under the Agreement, Staples also agrees to pay a facility fee at rates that range from 0.50% to 0.250% per annum depending on Staples’ credit rating. Staples may select interest periods of one, two, three or six months for Eurocurrency Rate loans, subject to availability. Interest will be payable at the end of the selected interest period, but no less frequently than quarterly.

The New Credit Agreement is unsecured and ranks pari passu with Staples’ public notes and other indebtedness.

The Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on Staples and its subsidiaries with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, disposition of assets, sale-leaseback transactions, subordinated debt, and transactions with affiliates. The covenants permit Staples to use proceeds of the credit loans for working capital and capital expenditures and for all other lawful corporate purposes, including payment of dividends, acquisitions of assets, capital stock of other companies and share repurchases, and to provide liquidity in connection with any commercial paper program, in each case to the extent permitted in the Agreement. The Agreement also contains financial covenants that require Staples to maintain a minimum ratio of consolidated EBIT plus rental expense to consolidated total interest expense plus rental expense of 1.5 to 1.0 and a maximum adjusted funded debt to EBITDAR ratio of 3.50 to 1.00.

The Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with covenants, any material representation or warranty made by Staples proving to be false in any material respect, certain insolvency or receivership events affecting Staples or its significant subsidiaries, defaults relating to other indebtedness of at least $100 million in the aggregate, certain judgment defaults, certain ERISA event defaults, and a change in control of Staples (as defined in the Agreement).

In the event of a default by Staples, the Administrative Agent may, and at the request of the requisite number of lenders shall, declare all obligations under the Agreement immediately due and payable, terminate the lenders’ commitments to make loans under the Agreement, and enforce any and all rights of the lenders or Administrative Agent under the Agreement and related documents. For certain events of default related to insolvency and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of Staples will become immediately due and payable.

Certain of the lenders party to the Agreement, and their respective affiliates, have performed, and may in the future perform for Staples and its subsidiaries, various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received, and will receive, customary fees and expenses.

The foregoing description is qualified by reference to the full text of the New Credit Agreement, which is filed as Exhibit 10.1 attached hereto, and incorporated by reference in its entirety into this Item 1.01.

Item 1.02 Termination of a Material Definitive Agreement.

On November 22, concurrently with its entry into the New Credit Agreement, the Company terminated all commitments by the lenders to extend further credit under the Prior Agreement. The Company did not incur any early termination penalties in connection with the termination of the Prior Agreement.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information contained in Item 1.01 of this Current Report is incorporated in its entirety by reference into this Item 2.03.

Item 9.01 Financial Statements and Exhibits.

The exhibit listed on the Exhibit Index immediately preceding such exhibit is filed as part of this Current Report on Form 8-K.

About STAPLES, INC. (NASDAQ:SPLS)
Staples, Inc. is a provider of products and services for business customers and consumers. The Company offers a selection of products, Websites and mobile platforms, and a range of copy, print and technology services. The Company operates through three business segments, which include North American Stores & Online, North American Commercial and International Operations. The North American Stores & Online segment includes its retail stores and Staples.com businesses in the United States and Canada. The North American Commercial segment consists of the United States and Canadian businesses that sell and deliver products and services directly to businesses, including Staples Advantage and Quill.com. The International Operations segment consists of businesses in approximately 25 countries in Europe, Australia, South America and Asia. It serves businesses of all sizes and consumers in North America, Europe, Australia, South America and Asia. STAPLES, INC. (NASDAQ:SPLS) Recent Trading Information
STAPLES, INC. (NASDAQ:SPLS) closed its last trading session up +0.03 at 9.83 with 9,218,552 shares trading hands.