Item 1.01
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Entry into a Material Definitive Agreement.
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On March 2, 2017, Chesapeake Utilities Corporation (the “Company”) entered into an uncommitted Master Note Agreement (the “Master Note Agreement”) with NYL Investors LLC (“NYL”), and other purchasers that may become a party thereto. Pursuant to the terms of the Master Note Agreement, the Company could request that NYL purchase, over the three-year period beginning on March 2, 2017, up to $100 million of the Company’s unsecured senior promissory notes at a fixed interest rate agreed upon by the parties and with a maturity date not to exceed twenty (20) years from the date of issuance (the “Shelf Notes”). In May 2018 and November 2018, the Company issued $50 million and $50 million, respectively, of Shelf Notes.
On November 15, 2018, NYL and the Company entered into an amendment to the Master Note Agreement (the Master Note Agreement, as amended, is referred to herein as the “Amended Master Note Agreement”). Pursuant to the terms of the Amended Master Note Agreement, the Company could request that NYL and other purchasers that may become a party thereto, purchase over the three-year period expiring November 15, 2021, up to $50 million of additional Shelf Notes.
On February 11, 2020, the Company submitted to NYL a formal request (the “Request for Purchase”) that NYL, and such other purchasers that may become a party to the Amended Master Note Agreement (collectively, the “Note Holders”), purchase thereunder $40 million of the Company’s Shelf Notes on or before August 14, 2020 (the “New Shelf Notes”). On February 11, 2020, the Request for Purchase was accepted and confirmed by the purchasers. The Company anticipates using the proceeds received from the issuances of the New Shelf Notes to reduce short-term borrowings under the Company’s revolving credit facility, lines of credit and/or to fund capital expenditures. The following is a summary of the material terms to which the New Shelf Notes will be subject:
(a) Principal Payments and Maturity Dates: The New Shelf Notes require annual principal payments of $4.0 million commencing on August 15, 2026. The entire outstanding principal balance of the New Shelf Notes is due and payable on August 15, 2035.
(b) Interest: The New Shelf Notes will bear interest at the rate of 2.96% per annum. Interest payments are due semi-annually on February 15 and August 15 of each year, commencing on February 15, 2021. All accrued but unpaid interest due under the New Shelf Notes is payable on August 15, 2035.
(c) Prepayment, Acceleration and Events of Default: The Company may be required to prepay the entire outstanding principal balance of the New Shelf Notes, and all accrued but unpaid interest thereon, if (i) the aggregate net book value of all the assets that are used in the regulated utilities business segments of the Company and its subsidiaries is less than 50% of Consolidated Total Assets (as defined in the Amended Master Note Agreement) of the Company and its subsidiaries; and (ii) the holder of such New Shelf Notes declares it to be due and payable. The Company may, at its option, prepay the New Shelf Notes in whole or in part at any time upon payment of a prepayment premium, subject to certain payment amount limitations and notice requirements. The New Shelf Notes may be accelerated by one or more of the Note Holders upon the occurrence of payment defaults of the New Shelf Notes, certain other indebtedness and obligations of the Company, and other events of default. The New Shelf Notes are automatically accelerated upon the occurrence of any bankruptcy, insolvency or similar event. The Amended Master Note Agreement includes customary events of default to which the New Shelf Notes are subject, including payment default on the New Shelf Notes and certain other indebtedness and obligations of the Company and bankruptcy, insolvency or similar events.
(d) Covenants: The Amended Master Note Agreement sets forth certain business and financial covenants to which the Company is subject when any New Shelf Note is outstanding, including covenants that limit or restrict the Company and its subsidiaries to incur indebtedness and to incur certain liens and encumbrances on any of its property.
The Amended Master Note Agreement and the form of the New Shelf Notes to be issued under the Amended Master Note Agreement are not being disclosed herewith pursuant to Item 601(b)(4)(v) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”). The Company agrees to furnish a copy of the Amended Master Note Agreement and the form of the New Shelf Note to the Securities and Exchange Commission upon request.
This Form 8-K does not constitute an offer to sell or a solicitation of an offer to buy any New Shelf Notes. The New Shelf Notes will not be and have not been registered under the Securities Act, or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.