Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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On October 14, 2016, Alliance One International, Inc. (Alliance One or the Company) completed certain refinancing
transactions, which are described below and in Item 8.01 of this Current Report on Form 8-K.
Senior Secured First Lien Notes
On October 14, 2016, the Company issued $275 million in aggregate principal amount of its 8.500% Senior Secured First Lien Notes due 2021 (the
Notes) pursuant to an Indenture (the Indenture) dated as of October 14, 2016 among Company, Alliance One Specialty Products, LLC, as initial guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee,
collateral agent, registrar and paying agent. The Notes were sold at 99.085% of their face value, for gross proceeds of approximately $272.5 million. The Notes bear interest at a rate of 8.500% per year, payable semi-annually in arrears in
cash on April 15 and October 15 of each year, beginning April 15, 2017, to holders of record at the close of business on the preceding April 1 and October 1, respectively. The Notes mature on April 15, 2021.
Guarantees
. The Notes are initially guaranteed on a senior secured basis by Alliance Ones subsidiary, Alliance One Specialty
Products, LLC (the Initial Guarantor), and each of its future material domestic subsidiaries are required to guarantee the Notes on a senior secured basis. The Initial Guarantor is not a material domestic subsidiary, and Alliance One
currently has no material domestic subsidiaries. The Initial Guarantor and any future guarantors of the Notes are referred to as the guarantors.
Collateral
. Alliance Ones and the guarantors obligations under the Notes and any guarantee of the Notes (and certain
related obligations) and under the asset-based lending facility described in Item 8.01 of this Current Report on Form 8-K (the ABL Facility) and any guarantee of the ABL Facility (and certain related obligations and obligations in
respect of certain hedging arrangements) are secured by first-priority liens on substantially all of Alliance Ones and the guarantors tangible and intangible assets, subject to certain exceptions and permitted liens (the
Collateral). Alliance Ones and the guarantors obligations under the Notes and any guarantee of the Notes (and certain related obligations) have first-priority in the waterfall set forth in a senior lien intercreditor
agreement entered into in connection with the issuance of the Notes and the establishment of the ABL Facility (the Senior Lien Intercreditor Agreement) in respect of the liens on the Notes Priority Collateral (as defined below). Alliance
Ones and the guarantors obligations under the ABL Facility and any guarantee of the ABL Facility (and certain related obligations and obligations in respect of certain hedging arrangements) have second-priority in the waterfall set forth
in the Senior Lien Intercreditor Agreement in respect of the liens on the Notes Priority Collateral. Alliance Ones and the guarantors obligations under the Notes and any guarantee of the Notes (and certain related obligations) have
second-priority in the waterfall set forth in the Senior Lien Intercreditor Agreement in respect of the liens on the ABL Priority Collateral (as defined below). Alliance Ones and the guarantors obligations under the ABL Facility and any
guarantee of the ABL Facility (and certain related obligations and obligations in respect of certain hedging arrangements) have first-priority in the waterfall set forth in the Senior Lien Intercreditor Agreement in respect of the liens on the ABL
Priority Collateral.
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Intercreditor Agreements
. The intercreditor relationship between and among the
holders of Alliance Ones and the guarantors obligations under the Notes and any guarantee of the Notes (and certain related obligations) and the holders of Alliance Ones and the guarantors obligations under the ABL Facility
and any guarantee of the ABL Facility (and certain related obligations and obligations in respect of certain hedging arrangements) are governed by the Senior Lien Intercreditor Agreement. The intercreditor relationship between and among, on the
one hand, the holders of Alliance Ones and the guarantors obligations under the Notes and any guarantee of the Notes (and certain related obligations) and the holders of Alliance Ones and the guarantors obligations under the
ABL Facility and any guarantee of the ABL Facility (and certain related obligations and obligations in respect of certain hedging arrangements) as first lien holders and, on the other the hand, the holders of Alliance Ones and any
guarantors obligations under the Companys 9.875% senior secured second lien notes due 2021 (the Second Lien Notes) and any guarantee of the Second Lien Notes (and certain related obligations) as second lien holders are
governed by an intercreditor agreement entered into in connection with the issuance of the Second Lien Notes in August 2013.
Ranking
. The Notes and any guarantees of the Notes are senior secured first lien obligations of Alliance One and the guarantors
and:
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are secured by first-priority liens on the Collateral on a pari passu basis with the indebtedness under the ABL Facility;
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rank pari passu in right of payment with all of Alliance Ones and the guarantors existing and future senior indebtedness, including indebtedness under the ABL Facility and the Second Lien Notes;
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rank senior in right of payment to all of Alliance Ones and the guarantors future subordinated indebtedness;
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are effectively senior to the obligations under the ABL Facility to the extent of the value of the Notes Priority Collateral (as defined below) and be effectively junior to the obligations under the ABL Facility to the
extent of the value of the ABL Priority Collateral (as defined below), in each case, pursuant to the waterfall treatment in the Senior Lien Intercreditor Agreement of the liens in respect of such respective collateral;
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are effectively senior to any existing and future unsecured indebtedness or junior lien indebtedness, including the Second Lien Notes, to the extent of the value of the Collateral;
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have first-priority in the waterfall set forth in the Senior Lien Intercreditor Agreement in respect of the liens on the Collateral that is not ABL Priority Collateral, including owned material real property in the
United States, capital stock of subsidiaries owned directly by Alliance One or a guarantor (except that, in the case of foreign subsidiaries, only capital stock of only direct foreign subsidiaries that are material are to be pledged and only 65% of
the voting capital stock and 100% of the non-voting capital stock are to be pledged), existing and after acquired intellectual property rights, equipment, related general intangibles and instruments and certain other related assets of the foregoing
and proceeds of the foregoing (collectively, the Notes Priority Collateral);
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have second-priority in the waterfall set forth in the Senior Lien Intercreditor Agreement in respect of the liens on the Collateral consisting of accounts receivable, inventories, cash (other than identifiable cash
proceeds of the Notes Priority Collateral), deposit accounts, related general intangibles and instruments, certain other related assets of the foregoing and proceeds of the foregoing (collectively, the ABL Priority Collateral); and
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are effectively subordinated to all obligations of our existing and future subsidiaries that are not guarantors, including trade payables.
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Optional Redemption
. At any time prior to October 15, 2018, Alliance One may redeem the Notes, in whole or in part, at a
redemption price equal to the make-whole amount as set forth in the Indenture, plus accrued and unpaid interest and additional interest, if any, to, but not including, the redemption date. In addition, Alliance One may redeem up to
35% of the aggregate principal amount of the Notes using net proceeds from certain equity offerings completed on or prior to October 15, 2018 at a redemption price equal to 108.500% of the aggregate principal amount of the Notes together with any
accrued and unpaid interest and additional interest, if any, to, but not including, the redemption date. On or after October 15, 2018, the Company may on any one or more occasions redeem all or a part of the Notes at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest on the Notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on October 15 of the years
indicated below, subject to the rights of holders of notes on the relevant record date to receive interest on the relevant interest payment date:
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Year
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Percentage
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2018
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104.250
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%
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2019
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102.125
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%
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2020 and thereafter
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100.000
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%
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Mandatory Repurchase Offers
. Upon a Change of Control (as defined in the Indenture),
Alliance One will be required to make an offer to repurchase the Notes at a price in cash equal to 101% of the principal amount thereof. Upon certain asset sales, the Company may be required to make an offer to repurchase the Notes at a price in
cash equal to 100% of the principal amount thereof.
Certain Covenants
. The Indenture contains covenants that will impose
restrictions on the Company and its subsidiaries (other than subsidiaries that may in the future be designated as Unrestricted Subsidiaries under the Indenture), including on Alliance Ones and such subsidiaries ability to,
among other things:
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incur additional indebtedness or issue disqualified stock or preferred stock;
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pay dividends and make other restricted payments;
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enter into sale and leaseback transactions;
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consolidate, merge, sell or otherwise dispose of all or substantially all of the Companys assets;
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enter into transactions with affiliates; and
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designate subsidiaries as Unrestricted Subsidiaries.
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4
The description of the Indenture and the Notes set forth herein is qualified in its entirety by
reference to the Indenture, which includes the form of the Notes, filed as Exhibit 4.1 hereto, which is incorporated by reference herein.
Termination of Existing Credit Facility
On October 14, 2016, the Company terminated the Amendment and Restatement Agreement dated as of July 26, 2013, as amended, among the Company,
its subsidiaries, Intabex Netherlands B.V. and Alliance One International AG, the lenders party thereto, and Deutsche Bank Trust Company Americas, as administrative agent, which governed the Companys $210.3 million senior secured revolving
credit facility.