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Item 1.01
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Entry into a Material Definitive Agreement
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On
November 7, 2019, Waste Management, Inc. (the “Company”) amended and restated its revolving credit agreement with a
syndicate of banks signatory thereto (the “Banks”) and Bank of America, N.A. (“BofA”), as administrative
agent for the Banks (the “Agent”) (the “Fifth Amended and Restated Credit Agreement”) to extend the term
and increase aggregate available revolving credit to serve U.S. and Canadian needs of the Company and its subsidiaries.
The Fifth Amended and
Restated Credit Agreement increased the total commitment under the facility from $2.75 billion to $3.5 billion (plus a $1 billion
accordion feature) and extended the maturity date to November 7, 2024, with the option to request up to two one-year extensions.
Waste Management of Canada Corporation and WM Quebec Inc., each a wholly-owned subsidiary of the Company,
are co-borrowers under the Fifth Amended and Restated Credit Agreement, and the Fifth Amended and Restated Credit Agreement permits
borrowing in Canadian dollars up to the U.S. dollar equivalent of $375 million, with such borrowings to be repaid in Canadian dollars.
Waste Management Holdings, Inc., a wholly-owned subsidiary of the Company, guarantees all of the obligations under the Fifth Amended
and Restated Credit Agreement.
Under
the Fifth Amended and Restated Credit Agreement, the Company is required to pay, quarterly in arrears, (a) an annual facility
fee in an amount ranging from .05% to .11% of the $3.5 billion in letter of credit and borrowing availability under the agreement
(the “Facility Fee”) and (b) letter of credit fees, payable quarterly, in an amount ranging from .575% to 1.015% of
outstanding letters of credit issued under the agreement (the “L/C Fee”). Any borrowings in U.S. dollars under the
Fifth Amended and Restated Credit Agreement will bear interest at (x) the London Interbank Offered Rate (“LIBOR”)
for the applicable interest period, plus a spread ranging from .575% to 1.015% per annum (a “LIBOR Loan”), or (y) a
base rate equal to the highest of (i) the U.S. Federal Funds Rate plus .5%, (ii) BofA’s announced prime rate, or
(iii) one-month LIBOR plus 1%, plus, in each case, a spread ranging from zero to .015% per annum (a “Base Rate Loan”).
Any borrowings in Canadian dollars will bear interest at (x) the Canadian Dollar Offered Rate (“CDOR”) for the applicable
interest period, plus a spread ranging from .575% to 1.015% per annum (any such CDOR loan, together with any LIBOR Loan, a “Eurocurrency
Loan”), or (y) a base rate equal to the higher of (i) BofA’s announced prime rate for commercial loans in Canadian
dollars in Canada to Canadian borrowers, or (ii) the average CDOR for a 30-day term, plus .5%, plus, in each case, a spread ranging
from zero to .015% per annum (a “Canadian Prime Rate Loan”). In certain instances, the Agent may approve a comparable
or successor reference rate.
The Facility Fee and
the L/C Fee percentages and the spread applicable to Eurocurrency Loans, Base Rate Loans and Canadian Prime Rate Loans depend on
the Company’s senior public debt rating as determined by Standard & Poor’s and Moody’s. Based on the Company’s
current senior public debt rating, the Facility Fee is .08% per annum, the L/C Fee is .795% per annum, the spread applicable to
Eurocurrency Loans is .795% per annum, and the spread applicable to Base Rate Loans and Canadian Prime Rate Loans is zero.
The Fifth Amended and
Restated Credit Agreement contains customary representations and warranties and affirmative and negative covenants. The Fifth Amended
and Restated Credit Agreement contains one financial covenant, which sets forth a maximum total debt to consolidated earnings before
interest, taxes, depreciation and amortization (“EBITDA”) ratio. This covenant provides that the ratio of the Company’s
total debt to its EBITDA (the “Leverage Ratio”) for the preceding four fiscal quarters will not be more than 3.75 to
1, provided that if an acquisition permitted under the Fifth Amended and Restated Credit Agreement involving aggregate consideration
in excess of $200 million occurs during the fiscal quarter, the Company shall have the right to increase the Leverage Ratio to
4.25 to 1 during such fiscal quarter and for the following three fiscal quarters (the “Elevated Leverage Ratio Period”).
There shall be no more than two Elevated Leverage Ratio Periods during the term of the agreement, and the Leverage Ratio must return
to 3.75 to 1 for at least one quarter between Elevated Leverage Ratio Periods. The calculation of all components used in the Leverage
Ratio covenant are as defined in the Fifth Amended and Restated Credit Agreement. The Fifth Amended and Restated Credit Agreement
also contains certain restrictions on the ability of the Company’s subsidiaries to incur additional indebtedness as well
as restrictions on the ability of the Company and its subsidiaries to, among other things, incur liens; engage in sale-leaseback
transactions; and engage in mergers and consolidations.
The
Fifth Amended and Restated Credit Agreement contains customary events of default, including nonpayment of principal when due; nonpayment
of interest, fees or other amounts after a stated grace period; inaccuracy of representations and warranties; violations of covenants,
subject in certain cases to negotiated grace periods; certain bankruptcies and liquidations; a cross-default of more than $200
million; certain unsatisfied judgments of more than $200 million; certain ERISA-related events; and a change in control of
the Company (as specified in the agreement). If an event of default occurs and is continuing, the Company may be required to repay
all amounts outstanding under the Fifth Amended and Restated Credit Agreement and cash-collateralize any outstanding letters of
credit supported by the Fifth Amended and Restated Credit Agreement. The Agent, or Banks that hold more than 50% of the commitments
under the Fifth Amended and Restated Credit Agreement, may elect to accelerate the maturity of all amounts due upon the occurrence
and during the continuation of an event of default.
On November 8, 2019,
the Company also increased its ability to borrow funds pursuant to its commercial paper program, provided that the aggregate outstanding
amount of promissory notes issued under such program, together with other borrowings under the Fifth Amended and Restated Credit
Agreement, shall not at any time exceed the aggregate authorized borrowing capacity under the Fifth Amended and Restated Credit
Agreement.
At closing, the Company
had no outstanding borrowings under the Fifth Amended and Restated Credit Agreement or its commercial paper program, which is supported
by the Fifth Amended and Restated Credit Agreement. The Company had $412 million letters of credit issued under the Fifth Amended
and Restated Credit Agreement, leaving unused and available credit capacity of approximately $3.338 billion.
Several of the Banks
that are party to the Fifth Amended and Restated Credit Agreement have in the past performed, and may in the future from time to
time perform, investment banking, financial advisory, lending and/or commercial banking services for the Company and its subsidiaries,
for which they have received, and may in the future receive, customary compensation and reimbursement of expenses.
The Fifth Amended and
Restated Credit Agreement is Exhibit 10.1 to this Current Report on Form 8-K. The above description of the Fifth Amended and Restated
Credit Agreement is not complete and is qualified in its entirety by reference to the exhibit.