Item 1.01. Entry into a Material Definitive Agreement
On March 2, 2020 (the Effective Date), United States Cellular Corporation (U.S. Cellular) entered into a $300,000,000 Credit Agreement by and among U.S. Cellular as Borrower, Toronto Dominion (Texas) LLC, as Administrative Agent, and the other lenders party thereto and identified therein (Revolving Credit Agreement).
The Revolving Credit Agreement provides U.S. Cellular with a $300,000,000 senior revolving credit facility for general corporate purposes, including working capital and capital expenditures.
The following briefly describes the terms of the Revolving Credit Agreement:
Borrowings under the Revolving Credit Agreement bear interest, at U.S. Cellular’s option, either at a LIBOR rate (subject to customary LIBOR replacement protocols) or at an alternative base rate, plus an applicable margin. U.S. Cellular’s interest costs under the Revolving Credit Agreement are based on credit ratings from Standard & Poor’s Rating Services, Moody’s Investor Services and/or Fitch Ratings. If U.S. Cellular’s credit ratings were lowered, the credit facility would not cease to be available solely as a result of a decline in its credit ratings.
The two financial covenants described below are included in the Revolving Credit Agreement:
1. Consolidated Interest Coverage Ratio (the ratio of Consolidated EBITDA to Consolidated Interest Charges) may not be less than 3.00 to 1.00 as of the end of any fiscal quarter.
2. Consolidated Leverage Ratio (the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA) may not be greater than 3.25 to 1.00 as of the end of any fiscal quarter.
The Revolving Credit Agreement is unsecured, subject to certain limitations. Additionally, certain wholly-owned subsidiaries are guarantors under the Revolving Credit Agreement.
The Revolving Credit Agreement includes representations and warranties, covenants, events of default and other terms and conditions that are substantially similar to U.S. Cellular’s existing revolving credit agreement.
A Change in Control, as such term is defined in the Revolving Credit Agreement, of TDS (as defined below) or U.S. Cellular would constitute a default and would enable the required lenders and the Administrative Agent to require all borrowings outstanding under the Revolving Credit Agreement to be repaid.
The continued availability of the Revolving Credit Agreement requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain the above financial ratios and provide representations on certain matters at the time of each borrowing.
Amounts under the Revolving Credit Agreement may be borrowed, repaid and reborrowed from time to time from and after the Effective Date until the maturity date. There are no outstanding borrowings under the Revolving Credit Agreement as of the Effective Date, except for letters of credit.
Amounts borrowed under the Revolving Credit Agreement will be due and payable in full on the fifth anniversary of the Effective Date.
The foregoing brief description is qualified by reference to the copy of the Revolving Credit Agreement attached hereto as Exhibit 4.1, which is incorporated herein by reference, and which identifies all the lenders thereto.
Some of the lenders and/or agents under the Revolving Credit Agreement and/or their affiliates may have various relationships with U.S. Cellular, its parent, Telephone and Data Systems, Inc. (TDS), and their subsidiaries involving banking or other financial services, including checking, cash management, brokerage, lending, investment banking, depository, indenture trustee and/or other services, including serving as a lender under the Revolving Credit Agreement or other TDS and/or U.S. Cellular credit agreements.
In connection with the Revolving Credit Agreement, U.S. Cellular and TDS entered into a Subordination Agreement dated the Effective Date together with Toronto Dominion (Texas) LLC, as Administrative Agent. Pursuant to the Revolving Credit Agreement and this Subordination Agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any consolidated funded indebtedness, will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under the Revolving Credit Agreement. As of the date of this Form 8-K, there is no outstanding funded indebtedness of U.S. Cellular that is subordinated pursuant to the Subordination Agreement. The form of the Subordination Agreement is attached as an exhibit to the Revolving Credit Agreement attached hereto as Exhibit 4.1.
In reviewing the agreements included as exhibits to this report, please note that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about U.S. Cellular or the other parties to the agreements. Certain of the agreements contain representations and warranties by one or more of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
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should not in any instance be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
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may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
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may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
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were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
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Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about U.S. Cellular may be found elsewhere in the U.S. Cellular’s SEC filings, which are available without charge through the SEC’s website at www.sec.gov.
Term Loan Agreement:
In connection with the U.S. Cellular Revolving Credit Agreement, U.S. Cellular entered into an amendment dated March 2, 2020 to its Amended and Restated Credit Agreement dated June 15, 2016, as amended May 10, 2018, January 30, 2019 and March 14, 2019 (collectively, the Term Loan Agreement), in order to conform the Term Loan Agreement with the U.S. Cellular Revolving Credit Agreement. A copy of this amendment is attached hereto as Exhibit 4.2.
