Item 1.01
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Entry into a Material Definitive Agreement.
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Revolving Credit Facility
On September 16, 2021, Starbucks Corporation (the “Company”) entered into a new $3.0 billion Credit Agreement (the “Five-Year Credit Agreement”) by and among the Company, as borrower, and Bank of America, N.A., in its capacity as Administrative Agent, Lender, Swing Line Lender and L/C Issuer, Wells Fargo Bank, N.A., Citibank, N.A. and U.S. Bank National Association, as Lenders, Co-Syndication Agents and L/C Issuers, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia and Morgan Stanley MUFG Loan Partners, LLC, as Co-Documentation Agents, BOFA Securities, Inc., Wells Fargo Securities, LLC, Citibank, N.A., and U.S. Bank National Association, as Joint Lead Arrangers and Joint Book Runners, and each of the other lenders, which is a party thereto.
The Five-Year Credit Agreement provides for a $3.0 billion unsecured, revolving credit facility (of which $150 million may be used for the issuances of letters of credit) and is scheduled to mature on September 16, 2026. Provided there is no default, the Company may request an increase from the lenders in the aggregate commitments by an amount not exceeding $1.0 billion, under certain circumstances as set forth in the Five-Year Credit Agreement.
Borrowings under the Five-Year Credit Agreement will bear interest at a variable interest rate based on the London Interbank Offered Rate (“LIBOR”), and, for U.S. Dollar-denominated loans under certain circumstances, a Base Rate (as defined in the Five-Year Credit Agreement), in each case plus an applicable rate. The applicable rate is based on the Company’s long-term credit ratings assigned by Moody’s and Standard & Poor’s rating agencies. The Five-Year Credit Agreement contains provisions specifying alternative interest rate calculations to be employed at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on borrowings based on LIBOR. The “Base Rate” of interest is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America’s prime rate, and (iii) the Eurocurrency Rate (as defined in the Five-Year Credit Agreement) plus 1.00%. Upon the occurrence of any event of default under the Five-Year Credit Agreement, interest on the outstanding amount of the indebtedness under the Five-Year Credit Agreement will bear interest at a rate per annum equal to 2% in excess of the interest then borne by such borrowings.
The Five-Year Credit Agreement contains provisions requiring the Company to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio of 2.50 to 1. The Five-Year Credit Agreement also contains certain customary events of default, including non-payment of principal, interest or fees, violation of covenants, cross default to certain other indebtedness, invalidity of any loan document, material judgments, bankruptcy and insolvency events, and change of control, subject, in certain instances, to cure periods. Upon the occurrence of an event of default, the lenders may elect to declare amounts outstanding under the Five-Year Credit Agreement immediately due and payable.
In the ordinary course of their respective businesses, the lenders under the Five-Year Credit Agreement and their affiliates have engaged, and may in the future engage, in commercial banking and/or investment banking transactions with the Company and its affiliates.
The foregoing description of the Five-Year Credit Agreement is qualified in its entirety by reference to the complete text of the agreement, a copy of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
Item 1.02
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Termination of a Material Definitive Agreement.
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On September 16, 2021, in connection with the Company’s entry into the Five-Year Credit Agreement discussed in Item 1.01, the Company terminated the Credit Agreement, dated October 25, 2017, as amended, and the Second Amended and Restated 364-Day Credit Agreement dated as of September 23, 2020, in each case, entered into by and among the Company, Bank of America, N.A., in its capacity as Administrative Agent and Swing Line Lender and certain other lenders.