Item 1.01 Entry into a Material Definitive Agreement.
On August 9, 2022 (the "Effective Date"), Constellation Brands, Inc. (the
"Company" or "Constellation"), Bank of America, N.A., as administrative agent
(the "Administrative Agent"), and certain other lenders (the "Credit Agreement
Lenders"), entered into a Term Loan Credit Agreement (the "Credit Agreement" and
loans made thereunder the "Term Loans").
The Credit Agreement provides for a delayed single draw term loan in the
aggregate principal amount of $1.0 billion. The proceeds of the Term Loans will
be used to pay a portion of the cash consideration payable in connection with
the previously-announced transaction to reclassify and convert each share of the
Class B Common Stock, par value $0.01 per share, of the Company (the "Class B
Common Stock") into one share of Class A Common Stock, par value $0.01 per
share, of the Company (the "Class A Common Stock") and the right to receive
$64.64 in cash, without interest (the "Reclassification") and to pay related
fees as well as fees related to closing the Credit Agreement. The commitments
under the Credit Agreement will terminate on the earliest of (i) the date on
which the Term Loans are funded pursuant to the terms and conditions to funding
set forth in the Credit Agreement (the "Funding Date"), (ii) June 30, 2023 and
(iii) the date the Company fails to obtain the requisite Company stockholder
approvals to consummate the Reclassification. The Term Loans will mature on the
earliest of (a) three years after the Funding Date and (b) December 31, 2025.
The Term Loans will bear interest, at the Company's option, at Term SOFR (plus
an additional credit spread adjustment of 0.10%) or Base Rate (each, as defined
in the Credit Agreement) plus (i) in the case of Term SOFR Term Loans, a margin
ranging from 0.875% to 1.50% per annum based on the Company's credit rating as
determined by Standard & Poor's Financial Services LLC ("S&P") or Moody's
Investors Service, Inc. ("Moody's") and (ii) in the case of Base Rate Term
Loans, a margin ranging from 0.00% to 0.50% per annum based on the Company's
credit rating as determined by S&P or Moody's. Unused commitments under the
Credit Agreement will incur a ticking fee of 0.10% per annum.
The Credit Agreement also contains certain affirmative and negative covenants
that the Company considers customary for facilities of this type and which are
consistent with the Company's existing (i) Tenth Amended and Restated Revolving
Credit Agreement dated as of April 14, 2022 (the "Revolving Facility") and
(ii) Term Loan Agreement dated as of March 26, 2020 (as amended by that certain
Amendment No. 1 to the Term Loan Agreement dated as of June 10, 2021 and that
certain Amendment No. 2 to the Term Loan Agreement dated as of April 14, 2022,
together with the Revolving Facility, the "Existing Facilities"). Such covenants
include, among other things, restrictions on the incurrence of subsidiary
indebtedness, additional liens, mergers and consolidations, transactions with
affiliates, and sale and leaseback transactions, in each case subject to
numerous conditions, exceptions, and thresholds. Consistent with the Existing
Facilities, the Credit Agreement also requires the Company to maintain a minimum
Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of
2.50:1.00 as of the end of each fiscal quarter and a maximum Consolidated Net
Leverage Ratio (as defined in the Credit Agreement and which shall be calculated
net of up to $750 million of unrestricted cash and cash equivalents) of
4.00:1:00 with a step-up to 4.50:1.00 with respect to the four fiscal quarters
following a Material Acquisition (as defined in the Credit Agreement). The
Credit Agreement also contains certain events of default consistent with the
Existing Facilities. Upon the occurrence of an event of default after any
applicable grace or cure period, any outstanding loans under the Credit
Agreement may be accelerated and/or the Credit Agreement Lenders' commitments
may be terminated.
Certain of the Credit Agreement Lenders, the Administrative Agent and their
affiliates have performed, and may in the future perform, various commercial
banking, investment banking, lending, underwriting and brokerage services, and
other financial and advisory services for the Company and its subsidiaries for
which they have received, and will receive, customary fees and expenses. The
Company
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and certain of its subsidiaries have, and may in the future, enter into
derivative arrangements with certain of the Credit Agreement Lenders and their
affiliates. In addition, one of the Credit Agreement Lenders is the trustee
under an indenture for certain of the Company's outstanding notes. Certain of
the Credit Agreement Lenders or their affiliates and affiliates of the
Administrative Agent are lenders under certain credit facilities to investment
vehicles controlled by members of the Sands family that are in some cases
affiliates of the Company. Such credit facilities are secured by pledges of
shares of Class A Common Stock, Class B Common Stock, or a combination thereof
and other credit support from certain members of the Sands family.
The foregoing description of the Credit Agreement is a summary, does not purport
to be complete and is qualified in its entirety by reference to the Credit
Agreement, a copy of which is filed as Exhibit 4.1 to this Current Report on
Form 8-K and incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under
an Off-Balance Sheet Arrangement of a Registrant.
The Company entered into the Credit Agreement on the Effective Date. See Item
1.01 which is incorporated herein by reference.
Important Additional Information
This Current Report on Form 8-K does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any vote or
approval nor shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. No offer of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.
Constellation has filed with the Securities and Exchange Commission (the "SEC")
a Registration Statement on Form S-4, which contains a preliminary proxy
statement/prospectus in connection with the proposed reclassification.
STOCKHOLDERS OF CONSTELLATION ARE URGED TO READ THE PRELIMINARY PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT HAVE BEEN AND WILL BE FILED WITH
THE SEC (INCLUDING, WHEN AVAILABLE, THE DEFINITIVE PROXY STATEMENT/PROSPECTUS)
CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN, OR WHEN FILED WILL
CONTAIN, IMPORTANT INFORMATION. Stockholders can obtain a free copy of the
preliminary proxy statement/prospectus (and the definitive proxy
statement/prospectus, when available), as well as other filings containing
information about Constellation, without charge, at the SEC's website,
www.sec.gov, and on Constellation's Investor Relations website at
https://ir.cbrands.com.
Participants in the Solicitation
The directors and executive officers of Constellation and other persons may be
considered participants in the solicitation of proxies from stockholders in
connection with the proposed transaction. Information regarding the persons who
may, under the rules of the SEC, be deemed participants in the solicitation of
proxies from stockholders in connection with the proposed transaction, including
a description of their respective direct or indirect interests, by security
holdings or otherwise, is included in the preliminary proxy statement/prospectus
described above. Additional information regarding Constellation's directors and
executive officers is available in Constellation's most recent proxy statement,
dated May 27, 2022, for the Annual Meeting of Stockholders held on July 19,
2022, which was filed with the SEC on June 2, 2022, Constellation's Current
Report on Form 8-K filed with the SEC on July 22, 2022, and Constellation's
other filings with the SEC. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect interests are
contained in the preliminary proxy statement/prospectus.
Item 9.01 Financial Statements and Exhibits.
For the exhibits that are filed herewith, see the Index to Exhibits immediately
following.
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