Item 1.01.
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Entry into a Material Definitive Agreement.
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Term Loan Agreement
On April 27, 2018, The J. M. Smucker Company (the Company) entered into that certain Term Loan Credit Agreement (the
Term Loan Agreement) with the various lenders named therein, and Bank of America, N.A., as administrative agent for the lenders (the Term Loan Agent).
The Term Loan Agreement provides for a $1.5 billion term facility that may be borrowed substantially concurrently with the closing of the
Acquisition (as defined below) and matures on the third anniversary of the Acquisition Closing Date (as defined below) (the Term Loan Maturity Date). The Term Loan Agreement does not provide for scheduled amortization payments. The
proceeds of the borrowing under the Term Loan Agreement will be used to (i) finance the consummation of the acquisition of Ainsworth Pet Nutrition Parent, LLC (the Acquisition), which was previously described in the Companys
Current Report on Form
8-K
filed with the Securities and Exchange Commission on April 5, 2018, (ii) refinance certain existing indebtedness of Ainsworth Pet Nutrition Parent, LLC and certain of its
subsidiaries (the Acquired Business) and (iii) pay fees and expenses incurred in connection with the foregoing.
The
Companys borrowings under the Term Loan Agreement will bear interest, at the Companys option, at either a base rate or a LIBOR rate, in each case plus an applicable margin. The base interest rate for borrowings is a rate equal to the
greatest of (i) the Term Loan Agents prime rate, (ii) the federal funds rate plus 0.50% and (iii) the
one-month
LIBOR rate plus 1.00%. Under the Term Loan Agreement, the applicable margins
on base rate loans range from 0.00% to 0.50% and the applicable margins on LIBOR loans range from 0.875% to 1.50%, in each case based on the Companys long-term unsecured debt rating.
Under the terms of the Term Loan Agreement, the Company must maintain, as of the last day of each fiscal quarter, a ratio of total debt to
EBITDA (the total leverage ratio) of no greater than 4.75 to 1.00 for all the fiscal quarter periods commencing with the the first fiscal quarter after the closing date of the Acquisition (the Acquisition Closing Date) and
ending April 30, 2019; a total leverage ratio of no greater than 4.25 to 1.00 for all the fiscal quarter periods between May 1, 2019 and April 30, 2020; and a total leverage ratio of no greater than 3.75 to 1.00 for all the fiscal
quarter periods between May 1, 2020 and the Term Loan Maturity Date. In addition, at all times after the first fiscal quarter after the Acquisition Closing Date, the Company must maintain a ratio of EBITDA to cash interest expense (the
interest coverage ratio) of at least 3.50 to 1.00. Each of such tests is subject to certain exceptions and qualifications set forth in the Term Loan Agreement.
The Term Loan Agreement contains customary representations and warranties and usual and customary affirmative and negative covenants. The Term
Loan Agreement also contains certain customary events of default. Subject to certain funds provisions, if an Event of Default (as defined in the Term Loan Agreement) has occurred and is continuing, the Term Loan Agent may declare that the loans and
any accrued interest are due and payable by the Company.
On April 27, 2018, in connection with the entry into the Term Loan
Agreement and the Amendment (as defined below), the Company terminated its commitment letter, dated April 4, 2018, with Merrill Lynch, Pierce, Fenner & Smith Incorporated and Bank of America, N.A. that provided a commitment, subject to
satisfaction of customary conditions, for a $1.9 billion
364-day
senior unsecured bridge term loan credit facility.
Several of the lenders under the Term Loan Agreement and their affiliates have various relationships with the Company and its subsidiaries
involving the provision of financial services, including investment banking, commercial banking, advisory, cash management, custody and trust services for which they receive customary fees and may do so in the future.
A copy of the Term Loan Agreement is included herein as Exhibit 10.1 and is incorporated herein by reference. The foregoing description of the
Term Loan Agreement is qualified in its entirety by reference to the full text of the Term Loan Agreement.
Amendment to Revolving Credit Agreement
On April 27, 2018, the Company entered into Amendment No. 1 to Credit Agreement (the Amendment) to the Revolving Credit
Agreement, dated as of September 1, 2017, among the Company and Smucker Foods of Canada Corp., as borrowers, the lenders party thereto, and Bank of America, N.A., as administrative agent (the Credit Agreement).
Among other matters, the Amendment increases the maximum total leverage ratio permitted under the total leverage ratio covenant upon the
closing of the Acquisition such that the Company must maintain, as of the last day of each fiscal quarter, a total leverage ratio of no greater than 4.75 to 1.00 for all the fiscal quarter periods commencing with the first fiscal quarter after the
Acquisition Closing Date and ending April 30, 2019; a total leverage ratio of no greater than 4.25 to 1.00 for all the fiscal quarter periods between May 1, 2019 and April 30, 2020; and a total leverage ratio of no greater than 3.75
to 1.00 for all the fiscal quarter periods between May 1, 2020 and the termination of the Credit Agreement. As amended, the Credit Agreement continues to require the Company to maintain an interest coverage ratio of at least 3.50 to 1.00.
Several of the lenders under the Credit Agreement and their affiliates have various relationships with the Company and its subsidiaries
involving the provision of financial services, including investment banking, commercial banking, advisory, cash management, custody and trust services for which they receive customary fees and may do so in the future.
The Credit Agreement was filed as Exhibit 10.1 to the Companys Current Report on Form
8-K
filed
on September 1, 2017. A copy of the Amendment to the Credit Agreement is included herein as Exhibit 10.2 and is incorporated herein by reference. The foregoing description of the Amendment is qualified in its entirety by reference to the full
text of the Amendment.