Item 1.01 Entry into a Material
Definitive Agreement.
New Credit Facility
On April 14, 2017
(the “
Closing Date
”), MSC Industrial Direct Co., Inc. (the “
Company
”) entered into a new
$600 million credit facility (the “
New Credit Facility
”), pursuant to a Credit Agreement dated as of April 14,
2017 by and among the Company, the several banks and other financial institutions or entities from time to time parties thereto
as lenders (the “
Lenders
”), and JPMorgan Chase Bank, N.A., as administrative agent (the “
Administrative
Agent
”). The New Credit Facility, which matures on April 14, 2022, provides for a five-year unsecured revolving loan
facility in the aggregate amount of $600 million.
The New Credit Facility
replaces the Company’s existing $650 million credit facility governed by that certain Credit Agreement, dated April 22, 2013,
among the Company, the lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “
Existing
Credit Facility
”). On the Closing Date, the Company borrowed $330 million under the New Credit Facility and used an additional
$16.7 million in cash on hand to repay the full amount outstanding under, and terminate, the Existing Credit Facility.
The New Credit Facility
permits up to $50 million to be used to fund letters of credit. The New Credit Facility also permits the Company to request one
or more incremental term loan facilities and/or increase the revolving loan commitments in an aggregate amount not to exceed $300
million. Subject to certain limitations, each such incremental term loan facility or revolving commitment increase will be on terms
as agreed to by the Company, the Administrative Agent and the lenders providing such financing.
Borrowings under the
New Credit Facility bear interest, at the Company’s option, either at (i) the LIBOR (London Interbank Offered Rate) rate
plus the applicable margin for LIBOR loans ranging from 1.00% to 1.375%, based on the Company’s consolidated leverage ratio;
or (ii) the greatest of (a) the Administrative Agent’s prime rate in effect on such day, (b) the federal funds effective
rate in effect on such day, plus 0.50% and (c) the LIBOR rate that would be calculated as of such day in respect of a proposed
LIBOR loan with a one-month interest period, plus 1.00%,
plus
, in the case of each of clauses (a) through (c), an applicable
margin ranging from 0.00% to 0.375%, based on the Company’s consolidated leverage ratio. The Company is required to pay a
quarterly undrawn fee ranging from 0.10% to 0.20% per annum on the unutilized portion of the New Credit Facility, based on the
Company’s consolidated leverage ratio. The Company is also required to pay quarterly letter of credit usage fees ranging
between 1.00% to 1.375% (based on the Company’s consolidated leverage ratio) on the amount of the daily average outstanding
letters of credit, and a quarterly fronting fee of 0.125% per annum on the undrawn and unexpired amount of each letter of credit.
The New Credit
Facility is unsecured and contains customary restrictions on the ability of the Company and its subsidiaries to (i) incur
debt, (ii) make investments, (iii) engage in fundamental corporate changes, such as mergers, consolidations, amalgamations,
liquidations or dissolutions, (iv) incur liens, (v) dispose of assets, (vi) enter into certain contractual restrictions on
the ability of the Company’s subsidiaries to make distributions, and (vii) engage in transactions with affiliates.
These covenants are subject to a number of significant exceptions and limitations. The New Credit Facility also requires
that, during the term of the New Credit Facility, the Company maintain a maximum consolidated leverage ratio of total
indebtedness to EBITDA (earnings before interest expense, taxes, depreciation and amortization) of no more than 3.00 to 1.00
(or, at the election of the Company after its consummates a material acquisition, a four-quarter temporary increase to 3.50
to 1.00), and a minimum consolidated interest coverage ratio of EBITDA to total interest expense of at least 3.00 to 1.00.
Borrowings under the New Credit Facility are guaranteed by certain of the Company’s restricted subsidiaries.
The New Credit Facility
also contains customary events of default. If an event of default under the New Credit Facility occurs and is continuing, then
with the consent of the requisite lenders the Administrative Agent may, or at the request of the requisite lenders the Administrative
Agent shall, terminate the revolving loan commitments and declare any outstanding obligations under the New Credit Facility to
be immediately due and payable. In addition, if the Company or certain of its material subsidiaries becomes the subject of voluntary
or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the New Credit
Facility will automatically become immediately due and payable.
The foregoing description
of the New Credit Facility is not complete and is qualified in its entirety by reference to the full terms and conditions of the
New Credit Facility, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Some of the Lenders
under the New Credit Facility or the Existing Credit Facility and/or their affiliates have from time to time performed and may
in the future perform various commercial banking, investment banking and other financial advisory services for the Company and/or
its subsidiaries in the ordinary course of business, for which they have received or will receive customary fees and commissions.
Amended and Restated
Note Purchase Agreement
On July 28, 2016,
the Company completed the issuance and sale of $75.0 million aggregate principal amount of its 2.65% Senior Notes, Series A, due
July 28, 2023 and $100.0 million aggregate principal amount of its 2.90% Senior Notes, Series B, due July 28, 2026 (the “
Notes
”)
in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The Notes were issued
pursuant to a note purchase agreement, dated July 28, 2016 (the “
Existing Note Purchase Agreement
”).
On the Closing Date,
the Company amended and restated the Existing Note Purchase Agreement (as so amended and restated, the “
Amended and Restated
Note Purchase Agreement
”) to (i) substantially conform the covenants contained in the Amended and Restated Note Purchase
Agreement to those contained in the New Credit Facility and (ii) provide that in the event of a change of control, the Company
will be required to offer to repurchase the Notes at par value.
The foregoing description
of the Amended and Restated Note Purchase Agreement is not complete and is qualified in its entirety by reference to the full terms
and conditions of the Amended and Restated Note Purchase Agreement, which is filed as Exhibit 10.2 to this Current Report on Form
8-K and incorporated herein by reference.