Item 1.01
|
Entry into a Material Definitive Agreement.
|
On November 14, 2017, Alcoa Corporation
(Holdings), Alcoa Nederland Holding B.V., a wholly owned subsidiary of Holdings (the Borrower), and certain subsidiaries of Holdings, entered into an Amendment and Restatement Agreement (the Amendment) to the
Revolving Credit Agreement, dated as of September 16, 2016, and amended as of October 26, 2016 (the Original Revolving Credit Agreement), in each case, with a syndicate of lenders and issuers named therein, and JPMorgan Chase
Bank, N.A., as administrative agent (the Administrative Agent) for the lenders and issuers. The Amendment was entered into to amend certain terms of the Original Revolving Credit Agreement (the Original Revolving Credit Agreement, as
amended by the Amendment, the Amended Revolving Credit Agreement).
The Amended Revolving Credit Agreement extends the
maturity date of the credit facility from November 1, 2021 to November 14, 2022, with certain extension rights in the discretion of each lender.
The aggregate amount of commitments under the Amended Revolving Credit Agreement
remains at $1.5 billion. The Amended Revolving Credit Agreement permits the Borrower to, from time to time, request that the existing lenders (at their discretion) or new lenders provide one or more additional tranches of term loans or increase the
aggregate amount of the revolving commitments, in an aggregate principal amount of up to $500 million.
The Amended Revolving Credit
Agreement contains customary affirmative covenants, negative covenants, and events of default substantially comparable to the Original Credit Agreement, but provides additional flexibility, in some cases based on financial ratios, for Holdings and
its subsidiaries to make restricted payments such as dividends and share buybacks, to make investments, to incur indebtedness, and otherwise to operate in the ordinary course.
Borrowings under the Amended Revolving Credit Agreement bear interest at a rate per annum equal to an applicable margin, plus, at the
Borrowers option, either (a) an adjusted LIBOR rate or (b) a base rate determined by reference to the highest of (1) the prime rate of JPMorgan Chase Bank, N.A., (2) the greater of the federal funds effective rate and the
overnight bank funding rate, plus 0.5% and (3) the one month adjusted LIBOR rate plus 1% per annum, all of which are unchanged from the Original Credit Agreement.
Under the Amended Revolving Credit Agreement, the applicable margin for LIBOR loans and base rate loans will vary based on Holdings
leverage ratio, the categories of which have been adjusted, and will range from 1.75% to 2.50% for LIBOR loans and from 0.75% to 1.50% for base rate loans. In addition to paying interest on outstanding borrowings under the Revolving Credit Facility,
the Borrower will be required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which will also be determined by Holdings leverage ratios, the tiers of which have been adjusted, and will range from
0.225% to 0.450%.
Financial covenants require the maintenance of a specified interest expense coverage ratio of not less than 5.00 to
1.00, and a leverage ratio for any period of four consecutive fiscal quarters that is not greater than 2.25 to 1.00, although, under the Amended Revolving Credit Agreement, such leverage ratio may be increased to a level not higher than 2.50 to 1.00
in certain circumstances.
The Amended Revolving Credit Agreement also permits restricted payments in an aggregate amount not to exceed
$100 million during any fiscal year (beginning with the 2017 fiscal year), with 50% of any unused amount of such base amount from any fiscal year available for use in the next succeeding fiscal year. In addition, if certain financial ratios are met
as of the end of the prior fiscal year, restricted payments of up to an additional $250 million are permitted during any fiscal year, with 50% of any unused amount of such base amount from any fiscal year available for use in the next succeeding
fiscal year.
Under the Amended Revolving Credit Agreement, the general investment basket has been increased to an aggregate amount not to
exceed $400 million. In addition, if certain financial ratios are met as of the end of the prior fiscal year, investments of an additional $200 million per year are permitted during any fiscal year, with 50% of any unused amount of such base amount
from any fiscal year available for use in the next succeeding fiscal year.
The general indebtedness basket has been doubled in size, not
to exceed the greater of $1.0 billion and 6% of consolidated total assets as defined.
Additional flexibility has been added for
investments and indebtedness in the ordinary course.
The obligations of Holdings or a domestic entity under the Amended Revolving Credit
Agreement, and all other obligations under the Amended Revolving Credit Agreement, are guaranteed and secured in the same manner as the Original Revolving Credit Agreement.
The foregoing description of the Amended Revolving Credit Agreement is not complete and is
subject to, and qualified in its entirety by reference to, the full text of the Amendment and the Amended Revolving Credit Agreement, which are attached hereto as Exhibit 10.1 and incorporated herein by reference. The representations, warranties and
covenants contained in the Amended Revolving Credit Agreement were made only for purposes of that agreement and as of specific dates and were solely for the benefit of the parties to the Amended Revolving Credit Agreement. Information concerning the
subject matter of the representations, warranties and covenants may change after the date of the Amended Revolving Credit Agreement.
In
the ordinary course of their respective businesses, the lenders and issuers under the Amended Revolving Credit Agreement, or their affiliates, have performed, and may in the future perform, commercial banking, investment banking, trust, advisory or
other financial services for Holdings and its affiliates for which they have received, and will receive, customary fees and expenses.