Item 1.01. Entry Into a Material Definitive Agreement
On March 31, 2017, Carpenter Technology Corporation (the Company) entered into a new unsecured revolving credit facility (the Credit Facility) pursuant to a Credit Agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and the other lenders party thereto (collectively, the Lenders), JPMorgan Chase Bank, N.A., as syndication agent, PNC Bank, National Association, U.S. Bank, National Association and Wells Fargo Bank, National Association, each, as a documentation agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners (the Credit Agreement).
The Credit Agreement replaces the Companys Credit Agreement dated as of June 28, 2013 (the Prior Credit Agreement), by and among the Company, the financial institutions party thereto, as lenders, Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and the other agents and arrangers party thereto, which had been set to expire on June 28, 2018. The Prior Credit Agreement was described in Item 1.01 of the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2013, and which description is incorporated herein by reference. The Prior Credit Agreement was terminated effective March 31, 2017.
The Credit Agreement extends to March 31, 2022; permits the Company to borrow funds to repay or refinance certain indebtedness of the Company and for working capital and other general corporate purposes; contains a revolving credit commitment amount of $400,000,000, subject to the Companys right, from time to time, to request an increase of the commitment to $600,000,000 in the aggregate; and provides for the issuance of letters of credit within such amount. The Company has the right to voluntarily prepay and reborrow loans, to terminate or reduce the commitments under the Credit Facility, and, subject to certain lender approvals, to join subsidiaries as subsidiary borrowers.
Interest on the borrowings under the Credit Facility will accrue at variable rates, based upon a defined Base Rate and Eurocurrency Rate, and are determined based upon the rating of the Companys senior unsecured long-term debt (the Debt Rating). The applicable margin to be added to Eurocurrency Rate ranges from 1.00% to 1.75%, and for Base Rate-determined loans, from 0.00% to 0.75%. The Company will also pay quarterly a commitment fee ranging from 0.125% to 0.40%, determined based upon the Companys Debt Rating, of the unused portion of the commitment under the Credit Agreement. In addition, the Company must pay certain letter of credit fees, ranging from 1.00% to 1.75%, with respect to letters of credit issued under the Credit Agreement.
The Company is subject to certain financial and restrictive covenants under the Credit Agreement, which, among other things,
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require the maintenance of a minimum interest coverage ratio of 3.50 to 1.00;
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require the Company maintain a debt to capital ratio of no more than 55%;
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prohibit certain additional indebtedness or contingent obligations and certain new liens on assets,
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prohibit certain acquisitions of or investments in businesses;
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restrict the Companys ability to merge or consolidate with, or otherwise sell substantially all of its assets to, another party;
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restrict the Companys ability to dispose of or sell certain assets in other situations; and
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restrict the Companys ability to declare or make dividends or stock distributions in circumstances that would cause a material adverse effect.
The restrictions of these covenants (other than the financial ratio covenants) are subject to certain exceptions or threshold triggering amounts or events specified in the Credit Agreement, and in some cases the restrictions may be waived by the Lenders. If the Company were to fail to comply with these covenants, the Company would be in default under the Credit Agreement.
The foregoing summary of the Credit Agreement is qualified in its entirety by reference to the full text of the Credit Agreement, a copy of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
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