Item 1.01. Entry into a Material Definitive Agreement.
On February 14, 2020, MGP Ingredients, Inc. (the “Company”) entered into a new credit agreement with the lenders named therein, Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender (the “Credit Agreement”). The Credit Agreement replaces the Company’s existing credit agreement between the Company and Wells Fargo dated August 23, 2017, as amended (the “Existing Credit Agreement”).
The Credit Agreement provides for a $300 million revolving credit facility. The Company may increase the facility from time to time by an aggregate principal amount of up to $100 million provided certain conditions are satisfied and at the discretion of the lenders. The Credit Agreement matures on February 14, 2025.
The interest rate for the Credit Agreement will equal either LIBOR plus an applicable margin or an alternate base rate (which will be the highest of the Wells Fargo prime rate, the 30 day LIBOR (resetting daily) plus 1.00%, and the Federal Funds rate plus 0.50%) plus the applicable margin. The applicable margin ranges from 1.00% to 2.00% for LIBOR rate loans and 0.00% to 1.00% for alternate base rate loans, depending on the Company’s leverage ratio determined as of the last day of the immediately preceding fiscal quarter. The Company has agreed to pay certain fees with respect to the new credit facility, including an unused commitment fee.
The Credit Agreement includes customary covenants restricting, among other things, the Company’s ability to incur additional indebtedness and liens, limiting asset transfers and limiting loans, advances and other investments. The Credit Agreement requires the Company to maintain a Consolidated Leverage Ratio (defined in the Credit Agreement as the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA) of no more than 3.50 to 1 (subject to an "acquisition holiday" provision that allows, subject to certain restrictions, the maximum Consolidated Leverage Ratio to increase to 4.00 to 1.00 during the fiscal quarter in which certain permitted acquisitions by the Company occur and each of the following three fiscal quarters), and to maintain a Consolidated Fixed Charge Coverage Ratio (the ratio of (a) the remainder of (i) Consolidated EBITDA minus (ii) dividends and distributions to shareholders minus (iii) income taxes, minus (iv) certain capital expenditures, minus (v) certain limited share repurchases, to (b) Consolidated Fixed Charges) of at least 1.25 to 1. The Credit Agreement includes customary representations, warranties, affirmative covenants and events of default.
The Credit Agreement is secured by a lien on substantially all of the assets of the Company and its subsidiaries and is guaranteed by the Company’s material subsidiaries.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
In connection with the Company’s entry into the Credit Agreement, on February 14, 2020, the Company entered into an amendment to the Note Purchase and Private Shelf Agreement, dated as of August 23, 2017, made by the Company, as issuer, and PGIM, Inc. and certain of its affiliates, as purchasers (the “Private Shelf Amendment”) in order to permit the Company’s use of the revolving credit facility (and any increases thereto) pursuant to the Credit Agreement and to make conforming amendments to certain financial and other covenants.
The foregoing description of the Private Shelf Amendment does not purport to be complete and is qualified in its entirety by reference to the Private Shelf Amendment, which is attached as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.