Trinseo S.A. (NYSE:TSE) Files An 8-K Entry into a Material Definitive AgreementItem 1.01 Entry into a Material Definitive Agreement
Credit Agreement
On September6, 2017, Trinseo Materials Operating S.C.A. and Trinseo Materials Finance,Inc. (the “Borrowers” or “Issuers”), together with Trinseo Holdings S.à r.l., and Trinseo Materials S.à r.l., each wholly-owned subsidiaries of Trinseo S.A. (the “Company”), entered into a senior secured credit agreement (the “Credit Agreement”) with Deutsche Bank AG New York Branch, as administrative agent, collateral agent L/C issuer and swing line lender, Citigroup Global Markets Inc., as syndication agent, and the lenders from time to time party thereto, that provides senior secured term loan financing of up to $700.0million (the “Senior Credit Facility”).
General. The Senior Credit Facility provides for senior secured financing consisting of a (i)$375.0 revolving credit facility, with a $25.0 million swingline subfacility and a $35.0 million letter of credit subfacility (the “Revolving Facility”) and (ii)$700.0 million senior secured term loan B facility (the “Term Loan”). The Borrowers may request incremental revolving credit commitments or term loans up to an amount equal to (x)$375.0million plus (y)the amount of incremental revolving credit commitments or term loans such that the first lien net leverage ratio, in the case of first lien indebtedness, and the secured net leverage ratio, in the case of junior lien indebtedness, would be no greater than 2.00 to 1.00, subject to certain conditions and receipt of commitments by existing or additional financial institutions and institutional lenders. All borrowings under the Senior Credit Facility are subject to the satisfaction of usual and customary conditions, including the absence of a default and the accuracy of the representations and warranties.
Interest Rate and Fees. Loans under the Revolving Facility, at our option, may be maintained from time to time as (a)LIBO rate loans, which bear interest at a rate per annum equal to the LIBO rate plus the Applicable Margin (as defined in the Credit Agreement), or (b)base rate loans which shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. “LIBO rate” is defined as the London interbank offered rate for U.S. dollars, adjusted for customary Eurodollar reserve requirements, if any; provided, that such LIBO rate may not be less than 0.00%per annum with respect to amounts outstanding under the Term Loan. “Base Rate” is defined as the higher of (x)the federal funds rate plus 1/2 of 1.00%, (y)the rate in effect as publically announced by Deutsche Bank AG New York Branch, as its “prime rate” and (z)the LIBO rate plus 1.00%; provided that in no event will the Base Rate be less than 2.00% per annum for all Term B Loans maintained as Base Rate Loans. The Applicable Margin applied to borrowings under the Revolving Facility may be subject to one step-down based on the Borrowers’ total net leverage ratio. On the last day of each calendar quarter we will be required to pay a commitment fee in respect of any unused commitments under the Revolving Facility equal to 0.375%per annum. The commitment fee may be subject to one step-down based on the Borrowers’ total net leverage ratio.
Collateral; Guarantees. The Senior Credit Facility is collateralized by a security interest in substantially all of the assets of Trinseo Materials Operating S.C.A., as lead borrower, Trinseo Materials Finance,Inc., as co-borrower, and the guarantors thereunder including Trinseo Materials S.à r.l., certain U.S. subsidiaries and certain foreign subsidiaries organized in Luxembourg, The Netherlands, Hong Kong, Singapore,Ireland, Germany and Switzerland.
Maturity and Amortization. The Revolving Facility has a maturity date of five years and the Term Loan has a maturity date of seven years. Loans made to the Revolving Facility must be repaid in full on or prior to its maturity date. The Term Loan requires scheduled quarterly payments in amounts equal to 0.25% of the original principal amount of the Term Loan with the balance paid at maturity.
Covenants. The Senior Credit Facility requires the Borrowers and their restricted subsidiaries to comply with customary affirmative, negative and financial covenants. Set forth below is a brief description of each.
Restrictive Covenants. The Senior Credit Facility contains covenants that, subject to certain exceptions, limit the Borrowers ability and the ability of their restricted subsidiaries to, among other things: incur liens; make certain loans and investments; incur additional debt (including guarantees or other contingent obligations); merge, consolidate liquidate or dissolve; transfer or sell assets; pay dividends and other distributions to shareholders or make certain other restricted payments; enter into transactions with affiliates; restrict any restricted subsidiary from paying dividends or making other distributions or agree to certain negative pledge clauses; materially alter the business they conduct; prepay certain other indebtedness and amend certain material documents; and change their fiscal year.
Financial Covenants. The Revolving Facility contains a financial covenant that requires compliance with a springing first lien net leverage ratio test. If the outstanding balance under the Revolving Facility exceeds 30% of the $375.0 million borrowing capacity (excluding undrawn letters of credit up to $10.0 million and cash collateralized letters of credit) at a quarter end, then the Borrowers’ first lien net leverage ratio may not exceed 2.00 to 1.00. If the Borrowers fail to comply with this covenant and their noncompliance is not waived by the required lenders under the Revolving Facility, an event of default would occur.
Events of Default. The Senior Credit Facility provides for customary events of default, including: (i)nonpayment of any principal, interest or fees (subject to applicable grace periods), (ii)failure to perform or observe any covenants (subject to applicable grace periods), (iii)material inaccuracy of representations or warranties, (iv)cross default and cross acceleration to indebtedness subject to a threshold amount, (v)certain bankruptcy events, (vi)judgments subject to a threshold amount not covered by insurance or indemnity, (vii)invalidity of the definitive agreement for the Senior Credit Facility or any related security or guaranty document, (viii)a change of control, (ix)ERISA liabilities which result in a material adverse effect, and (x)invalidity of any material portion of the security interest in assets securing the Senior Credit Facility. Upon an event of default and absent a waiver or an amendment from the requisite lenders, the administrative agent may terminate commitments and accelerate payment of all outstanding borrowings under the Revolving Facility and Term Loan, subject to any applicable cure period.
