UNITED STATES CELLULAR CORPORATION (NYSE:USM) Files An 8-K Entry into a Material Definitive AgreementItem 1.01. Entry into a Material Definitive Agreement
This Current Report on Form8-K is being filed to disclose that on May10, 2018 (the “Effective Date”), United States Cellular Corporation (“U.S. Cellular” or the “Company”) entered into a $300,000,000 Credit Agreement by and among U.S. Cellular as Borrower, Toronto Dominion (Texas), LLC, as Administrative Agent, and the other lenders party thereto and identified therein (“Revolving Credit Agreement”).
The Revolving Credit Agreement provides U.S. Cellular with a $300,000,000 senior revolving credit facility for general corporate purposes, including working capital, non-hostile acquisitions, spectrum purchases and capital expenditures.
The following briefly describes the terms of the Revolving Credit Agreement:
Borrowings under the Revolving Credit Agreement bear interest, at U.S. Cellular’s option, either at a LIBOR rate or at an alternative base rate, plus an applicable margin. U.S. Cellular’s interest costs under the Revolving Credit Agreement are based on credit ratings from Standard& Poor’s Rating Services, Moody’s Investor Services or Fitch Ratings. If U.S. Cellular’s credit ratings were lowered, the credit facility would not cease to be available solely as a result of a decline in its credit ratings.
The two financial covenants described below are included in the Revolving Credit Agreement:
1. Consolidated Interest Coverage Ratio (the ratio of Consolidated EBITDA to Consolidated Interest Charges), may not be less than 3.00 to 1 as of the end of any fiscal quarter.
2. Consolidated Leverage Ratio (the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA) may not be greater than the ratios indicated for each period specified below:
|
Period |
Ratios |
|
From the Effective Date through June30, 2019 |
3.25 to 1.00 |
|
From July1, 2019 and thereafter |
3.00 to 1.00 |
The Revolving Credit Agreement is unsecured.
The Revolving Credit Agreement provides, among other things, that U.S. Cellular may not, and may not cause or permit any of its subsidiaries to sell, or incur or permit to exist any liens on, any property or assets now owned or hereafter acquired by U.S. Cellular or by any such subsidiary, make investments, effect mergers or other fundamental changes, make dividends, distributions or other restricted payments, or enter into transactions with affiliates, other than as expressly excepted in the Revolving Credit Agreement.
The Revolving Credit Agreement includes representations and warranties, covenants, events of default and other terms and conditions that are substantially similar to U.S. Cellular’s existing revolving credit agreement.
A Change in Control, as such term is defined in the Revolving Credit Agreement, of TDS (as defined below) or U.S. Cellular would constitute a default and would require all borrowings outstanding under the Revolving Credit Agreement to be repaid.
The continued availability of the Revolving Credit Agreement requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain the above financial ratios and provide representations on certain matters at the time of each borrowing.
Amounts under the Revolving Credit Agreement may be borrowed, repaid and reborrowed from time to time from and after the Effective Date until the maturity date. There are no outstanding borrowings under the Revolving Credit Agreement as of the Effective Date, except for letters of credit.
Amounts borrowed under the Revolving Credit Agreement will be due and payable in full on the fifth anniversary of the agreement date.
The foregoing brief description is qualified by reference to the copy of the Revolving Credit Agreement attached hereto as Exhibit4.1, which is incorporated herein by reference, and which identifies the lenders thereto.
Some of the lenders and/or agents under the Revolving Credit Agreement and/or their affiliates may have various relationships with U.S. Cellular, its parent, Telephone and Data Systems,Inc. (“TDS”), and their subsidiaries involving banking or other financial services, including checking, cash management, brokerage, lending, investment banking, depository, indenture trustee and/or other services, including serving as a lender under the Revolving Credit Agreement or other TDS and/or U.S. Cellular credit agreements.
In connection with the Revolving Credit Agreement, U.S. Cellular and TDS entered into a Subordination Agreement dated the Effective Date together with Toronto Dominion (Texas), LLC, as Administrative Agent. to this Subordination Agreement, (a)any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b)any (i)consolidated funded indebtedness (other than Refinancing Indebtedness as defined in the Subordination Agreement) in excess of $105,000,000, and (ii)Refinancing Indebtednessin excess of $250,000,000,will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under the Revolving Credit Agreement. As of the date of this Form8-K, there is no outstanding funded indebtedness of U.S. Cellular that is subordinated to the Subordination Agreement. The form of the Subordination Agreement is attached as an exhibit to the Revolving Credit Agreement attached hereto as Exhibit4.1.