Item 1.01 Entry into a Material Definitive Agreement
On September 25, 2019, Beacon Roofing Supply, Inc., as issuer (the “Company”), and certain subsidiaries of the Company, as guarantors (collectively, the “Guarantors”), entered into a purchase agreement (the “Purchase Agreement”) with Wells Fargo Securities, LLC and Citigroup Global Markets Inc., as the initial purchasers (the “Initial Purchasers”), pursuant to which the Company has agreed to sell $300.0 million aggregate principal amount of its 4.500% senior secured notes due 2026 (the “2026 Senior Notes”) and related subsidiary guarantees in a private offering. The offering of the 2026 Senior Notes is expected to close on October 9, 2019 (the “Closing Date”), subject to customary closing conditions.
The 2026 Senior Notes and related subsidiary guarantees will be issued pursuant to an indenture, to be dated as of the Closing Date (the “Indenture”), by and among the Company, the Guarantors and U.S. Bank National Association, as trustee and collateral agent.
The Company intends to use the net proceeds from the offering, together with cash on hand and/or available borrowings under its existing senior secured asset-based revolving credit facility (the “2023 ABL”), to redeem all $300.0 million aggregate principal amount outstanding of its 6.375% senior unsecured notes due 2023 (the “2023 Senior Notes”) and pay related transaction premiums, accrued interest, fees and expenses.
The Purchase Agreement contains customary representations, warranties and agreements by the Company and the Guarantors. In addition, the Company and the Guarantors have agreed to indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), or to contribute to payments the Initial Purchasers may be required to make in respect of those liabilities. Furthermore, the Company and the Guarantors have agreed with the Initial Purchasers not to offer or sell any debt securities issued or guaranteed by the Company or the Guarantors for a period of 90 days after the date of the Purchase Agreement without the prior written consent of the Initial Purchasers.
The 2026 Senior Notes and related subsidiary guarantees will be offered only to qualified institutional buyers under Rule 144A of the Securities Act and to certain non-U.S. persons in transactions outside the United States under Regulation S under the Securities Act. The issuance and sale of the 2026 Senior Notes and related subsidiary guarantees have not been and will not be registered under the Securities Act or the securities laws of any state or other jurisdiction, and the 2026 Senior Notes and related subsidiary guarantees may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and other applicable securities laws.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is filed as Exhibit 10.1 hereto, and which is incorporated herein by reference.
The Initial Purchasers and their respective affiliates perform various financial advisory, investment banking and commercial banking services from time to time for the Company and its affiliates for which the Company or its affiliates pay customary compensation.
Affiliates of the Initial Purchasers are lenders and/or agents under the Company’s existing senior secured term loan “B” facility (the “2025 Term Loan”) and the 2023 ABL. In particular, an affiliate of Wells Fargo Securities, LLC is a lender, administrative agent and collateral agent under the 2023 ABL and a lender under the 2025 Term Loan, and an affiliate of Citigroup Global Markets Inc. is a lender, administrative agent and collateral agent under the 2025 Term Loan and a lender under the 2023 ABL. Affiliates of the Initial Purchasers may also be holders of the 2023 Senior Notes. In addition, an affiliate of Wells Fargo Securities, LLC is party to interest rate swap arrangements with Beacon Sales Acquisition, Inc., a Guarantor, that effectively fix the interest rate with respect to $500.0 million of the aggregate principal amount of outstanding borrowings under the 2025 Term Loan to 3.74%. Certain of the Initial Purchasers or their respective affiliates routinely hedge, and certain other of those Initial Purchasers or their respective affiliates may hedge, their credit exposure to the Company consistent with their customary risk management policies. Affiliates of the Initial Purchasers may receive a portion of the net proceeds of the offering of the 2026 Senior Notes as a result of the Company redeeming the 2023 Senior Notes held by such affiliates and/or repaying amounts outstanding under the 2023 ABL.