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Item 1.01
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Entry into Definitive Material Agreement.
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On the Effective Date, the Company entered into a Credit Agreement with the lenders named therein, Bank of America, N.A., as administrative agent, and the other parties from time to time party thereto (the “Credit Agreement”). The Credit Agreement provides for an aggregate of $15.50 billion of term loan commitments, consisting of a $7.75 billion unsecured term A-3 facility (the “Term A-3 Facility”) and a $7.75 billion unsecured term A-5 facility (the “Term A-5 Facility”, and together with the Term A-3 Facility, the “Term Facilities”). The Company’s obligations under the Credit Agreement are guaranteed on an unsecured basis by its subsidiaries, Broadcom Corporation, a California corporation, and Broadcom Technologies Inc., a Delaware corporation.
On the Effective Date, the Company borrowed $12.0 billion of term loans ratably between the Term Facilities to fund the acquisition described herein, to provide working capital to the Company and its subsidiaries and for related costs and expenses. The Company intends to borrow the remaining commitments, subject to certain conditions set forth in the Credit Agreement, on up to two occasions to fund the refinancing of CA, Inc.’s $750 million aggregate principal amount of 5.375% Senior Notes due December 1, 2019 and of Broadcom Technologies Inc.’s and Broadcom Corporation’s $2.75 billion aggregate principal amount of 2.375% Senior Notes due January 15, 2020.
Such remaining commitments will be reduced or terminated, as applicable, upon the earlier of the refinancing of such senior notes and certain dates set forth in the Credit Agreement. The term loans under the Term A-3 Facility and Term A-5 Facility will mature and be payable in full on the third or fifth anniversary, respectively, of the Effective Date.
Borrowings under the Term Facilities will bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the reserve adjusted Eurocurrency rate, in each case, plus an applicable margin that varies by facility and is calculated based on the Company’s credit ratings from time to time.
Voluntary prepayments of the loans and voluntary reductions of the unutilized portion of the commitments under the Credit Agreement are permissible without penalty (other than customary Eurocurrency loan breakage) ratably between the Facilities, subject to certain conditions pertaining to minimum notice and minimum reduction amounts as described in the Credit Agreement.
The Credit Agreement contains representations and warranties and affirmative and negative covenants customary for unsecured financings of this type, as well as a financial covenant requiring that, as of the last day of each fiscal quarter, commencing with the first full quarter-end after the Effective Date, the Company’s Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) shall not be less than 3.00:1.00, as more fully described in the Credit Agreement.
The Credit Agreement also contains various events of default (subject to grace periods, as applicable), including among others: nonpayment of principal, interest or fees; breach of covenant; payment default on, or acceleration under, certain other material indebtedness; inaccuracy of the representations or warranties in any material respect; bankruptcy or insolvency; certain unsatisfied judgments; certain ERISA violations; the occurrence of a change of control; and the invalidity or unenforceability of the Credit Agreement or certain other documents executed in connection therewith.