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Item 1.01.
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Entry into a Material Definitive Agreement.
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Credit Agreement
On April 21, 2020, TD Ameritrade Clearing, Inc. (“TDAC”), a wholly-owned subsidiary of TD Ameritrade Holding Corporation (the “Company”), entered into an amendment (the “Amendment”) to that certain Credit Agreement, dated as of May 16, 2019 (the “Credit Agreement” and as amended by the Amendment, the “Amended Credit Agreement”), among TDAC, the lenders party thereto (the “Lenders”) and Wells Fargo Bank, National Association, as administrative agent.
The Amended Credit Agreement provides an $850 million senior unsecured revolving loan facility that matures on April 20, 2021. Borrowings under the Amended Credit Agreement may be used for working capital needs and for general corporate purposes.
The applicable interest rate under the Amended Credit Agreement is calculated as a per annum rate equal to, at the option of TDAC, (a) LIBOR plus an applicable margin, which is currently 1.25% (“Eurodollar loans”) or (b) the federal funds effective rate plus an applicable margin, which is currently 1.25% (“Federal Funds Rate loans”). The applicable margins for both Eurodollar loans and Federal Funds Rate loans under the Amended Credit Agreement will be reduced in the event of certain improvements in the Company’s senior unsecured long-term debt ratings (subject to a minimum of 1.00% for both Eurodollar loans and Federal Funds Rate loans) and will be increased in the event of certain reductions in the Company’s senior unsecured long-term debt ratings (subject to a maximum of 1.50% for both Eurodollar loans and Federal Funds Rate loans). TDAC pays an annual commitment fee which is a percentage of the unused capacity of the Amended Credit Agreement. The commitment fee varies based on the Company’s senior unsecured long-term debt ratings and is currently 0.25%.
The Amended Credit Agreement contains negative covenants that limit or restrict, subject to certain exceptions, the incurrence of liens, indebtedness of TDAC and its subsidiaries, changes in nature of business, mergers, consolidations, and the sale of all or substantially all of the assets of TDAC and its subsidiaries, taken as a whole. TDAC is also required to maintain minimum consolidated tangible net worth and is required to maintain compliance with minimum regulatory net capital requirements. The Amended Credit Agreement also contains customary affirmative covenants, including, but not limited to, compliance with applicable law, payment of taxes, maintenance of insurance, preservation of corporate existence, keeping of proper books of record and account and maintenance of properties.
The Amended Credit Agreement includes events of default customary for such financings, including, but not limited to, nonpayment of principal, interest or fees, cross-defaults to other debt, inaccuracies of representations and warranties, failure to perform negative covenants, failure to perform other terms and conditions, events of bankruptcy and insolvency, change of control and unsatisfied judgments.
The foregoing description of the Amended Credit Agreement is qualified in its entirety by reference to the full text of the Amended Credit Agreement, which is attached hereto as Exhibit 10.1 and incorporated by reference herein.