Item 1.01
.
Entry into a Material Definitive Agreement
Amendment to Ashland Credit Agreement
On
July 8, 2016, Ashland Inc. (
Ashland
) entered into Amendment No. 1 (as amended or otherwise modified from time to time, the
Ashland Amendment
) to the Credit Agreement (as amended or otherwise modified from time
to time, the
Ashland Credit Agreement
) dated as of June 23, 2015, among Ashland, The Bank of Nova Scotia, as Administrative Agent, Swing Line Lender and an L/C Issuer, Citibank, N.A., as Syndication Agent, and the Lenders from
time to time party thereto.
The Ashland Amendment amends the Ashland Credit Agreement to permit, among other things, (i) the merger of
Ashland into a subsidiary of Ashland Global Holdings Inc. (
Ashland Global
), pursuant to which Ashland Global will become Ashlands new public parent company, (ii) the series of transactions after which (a) Valvoline US LLC
will own substantially all of the assets constituting the Valvoline business and (b) Ashland will no longer own the Valvoline business (the
Ashland Reorganization
) and (iii) borrowings by Valvoline Inc.
(
Valvoline
) or one or more finance subsidiaries of Valvoline US LLC (
Valvoline US
), a newly formed subsidiary of Ashland, of up to $1,250 million in indebtedness (the
Valvoline Borrowings
).
Additionally, the Ashland Amendment provides that once the aggregate principal amount of the Valvoline Borrowings reaches $750 million, Ashland is required to use the net proceeds of such Valvoline Borrowings to repay its existing term loan A loans
and/or permanently reduce its existing revolving credit commitments under the Ashland Credit Agreement in an aggregate amount of up to $1 billion.
The foregoing summary of the Ashland Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full
text of the Ashland Amendment, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Valvoline Credit Agreement
On July 11, 2016, Valvoline Finco One LLC (
Valvoline Finco
), a Delaware limited liability company and a wholly
owned, newly formed finance subsidiary of Valvoline US, entered into a Credit Agreement (the
Valvoline Credit Agreement
) among Valvoline Finco, as the Initial Borrower, The Bank of Nova Scotia, as Administrative Agent, Citibank,
N.A., as Syndication Agent, and the Lenders party thereto. The Valvoline Credit Agreement provides for an aggregate principal amount of $1,325 million in senior secured credit facilities (the
Valvoline Credit Facilities
),
comprised of (i) a five-year $875 million term loan A facility (the
Term Loan Facility
) and (ii) a five-year $450 million revolving credit facility (including a $100 million letter of credit sublimit) (the
Revolving
Facility
). The Valvoline Credit Facilities were undrawn as of the signing date (such date, the
Effective Date
). Proceeds of borrowings under the Valvoline Credit Facilities will be used, among other things, (i) to repay
existing Ashland debt, (ii) to pay fees and expenses related to the Valvoline Credit Facilities and (iii) for ongoing working capital and general corporate purposes.
The initial funding (such date, the
Funding Date
) under the Valvoline Credit Facilities is subject to certain conditions
precedent, including (i) execution of the guaranty and security agreements, (ii) satisfaction of certain collateral requirements, (iii) delivery of a certificate by the Borrower (as defined below) that it expects to or has received certain tax
opinions related to the Ashland Reorganization and the spin-off of Valvoline, (iv) payment of fees and expenses to the administrative agent, the arrangers and lenders, (v) the transfer of the Valvoline
business to the Borrower and its subsidiaries, (vi) the liabilities of the Borrower not exceeding $200 million in the aggregate other than certain specified liabilities, (vii) the merger of
Valvoline Finco with and into Valvoline, (viii) the Valvoline business having, on a pro forma basis, at least $350 million of unrestricted cash and unused revolving credit commitments in the aggregate (under both the Revolving Facility and the
Permitted Receivables Facility (as defined in the Valvoline Credit Agreement)), (ix) after giving effect to the initial funding, the Consolidated Net Leverage Ratio (as defined in the Valvoline Credit Agreement) not exceeding 3.50 to 1.00, (x) any
Dispositions (as defined in the Valvoline Credit Agreement) of assets of the Valvoline business complying with certain covenants set forth in the Valvoline Credit Agreement and (xi) certain other conditions set forth in the Valvoline Credit
Agreement. Following the merger of Valvoline Finco with and into Valvoline, Valvoline will become the borrower for all purposes under the Valvoline Credit Agreement. For purposes hereof, prior to such merger, the
Borrower
refers
to Valvoline Finco, and after such merger, the
Borrower
refers to Valvoline.
Effective at the time on the Funding
Date, the Valvoline Credit Facility will be guaranteed by Valvolines existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special purpose financing subsidiaries, regulated subsidiaries, foreign
subsidiaries and certain other subsidiaries), and will be secured by a first-priority security interest in substantially all the personal property assets, and certain real property assets, of Valvoline and the guarantors, including all or a portion
of the equity interests of certain of Valvolines domestic subsidiaries and first-tier foreign subsidiaries and, in certain cases, a portion of the equity interests of other foreign subsidiaries.
At the Borrowers option, loans issued under the Valvoline Credit Agreement will bear interest at either LIBOR or an alternate base rate,
in each case plus the applicable interest rate margin. Loans will initially bear interest at LIBOR plus 2.375% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 1.375%, in the alternative, through and including the date
of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between LIBOR plus 1.500% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.500% per annum and the alternate base
rate plus 1.500% annum), based upon the Borrowers corporate credit ratings or the Consolidated First Lien Net Leverage Ratio (as defined in the Valvoline Credit Agreement) (whichever yields a lower applicable interest rate margin) at such
time. In addition, after the Funding Date, the Borrower will initially be required to pay fees of 0.375% per annum on the daily unused amount of the Revolving Facility through and including the date of delivery of a compliance certificate, and
thereafter the fee rate will fluctuate between 0.200% and 0.500% per annum, based upon the Borrowers corporate credit ratings or the Consolidated First Lien Net Leverage Ratio (whichever yields a lower applicable rate). On either the Funding
Date or the date of the termination of the Valvoline Credit Agreement without the funding of any loans thereunder, the Borrower will be required to pay a ticking fee of 0.375% per annum on the amount of the aggregate commitments under the Valvoline
Credit Facilities. The ticking fee accrues from the date that is ninety days after the Effective Date until the Funding Date or the date of such termination.
The Valvoline Credit Facilities may be prepaid at any time without premium. The Term Loan Facility will amortize at a rate of 5% per annum in
each of the first and second years after the Funding Date (payable in equal quarterly installments), 10% per annum in each of the third and fourth years after funding (payable in equal quarterly installments), and 5% per quarter for each of the
first three calendar quarters during the fifth year after the Funding Date, with the outstanding balance of the Term Loan Facility to be paid on the final maturity date. The final maturity date of the Valvoline Credit Facilities is the date that is
the fifth anniversary after the Funding Date unless the Funding Date is more than 6 months after the Effective Date, in which case the final maturity date will be shortened by the number of days that the Funding Date exceeds the date that is 6
months after the Effective Date.
The Valvoline Credit Agreement contains usual and customary representations and warranties, and
usual and customary affirmative and negative covenants, including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial
covenants (including maintenance of a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio) and other customary limitations. The Valvoline Credit Agreement also contains usual and customary events of default,
including non-payment of principal, interest, fees and other amounts, material breach of a representation or warranty, non-performance of covenants and obligations, default on other material debt, bankruptcy or insolvency, material judgments,
incurrence of certain material ERISA liabilities, impairment of loan documentation or security and change of control.
The foregoing
summary of the Valvoline Credit Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Valvoline Credit Agreement, a copy of which is filed as Exhibit 10.2 hereto and incorporated herein by
reference.