Section 1.01 Entering into a Material Definitive Agreement.
Third amendment to the credit agreement
The Amended Revolving Credit Agreement extends the maturity date of the Credit Facility by
Pursuant to the Third Amendment, each party to the loan was automatically released from its obligations under the security documents (other than the security agreement to which it is a party) and the liens granted by such parties on any security under the initial revolving credit agreement have been released and terminated. Under the Amended Revolving Credit Agreement, if Holdings or the Borrower, as the case may be, fails to achieve a designated rating of Ba1 from Moody’s and BB+ from S&P or better, in each case (the “Rating Requirement”) ) (such occurrence, a “Collateral Event”), each party to the loan will be required to execute all collateral documents at the request of the Administrative Agent or certain lenders to secure any collateral under the modified revolving credit, with regard to the obligations of the parties to the loan organized in
Borrowings under the Amended Revolving Credit Agreement bear interest at an annual rate equal to an applicable margin, plus, at the Borrower’s option, either (a)(1) for loans denominated in dollars, a SOFR rate adjusted term, either (2) for loans denominated in euros, an adjusted EURIBOR rate, or (b) in each case, a base rate determined by reference to the higher of (1) the interest rate offered by the
Under the Amended Revolving Credit Agreement, the applicable margin for Reference Term Loans and Base Rate Loans will vary depending on the debt ratings of Holdings or the borrower, as applicable, by Moody’s, S&P and Fitch, which will range from 1.125% to 1.750% for term benchmark loans and from 0.125% to 0.750% for base rate loans. In addition to paying interest on outstanding borrowings, 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 the ratings of the Holdings or Borrowers, as the case may be, by Moody’s, S&P and Fitch, which will range from 0.100% to 0.250%.
In addition, the Amended Revolving Credit Agreement implements a sustainability adjustment to the applicable margin and commitment fee for the Revolving Facility payable by the Borrower which may result in a positive or negative adjustment of up to ( a) 0.050% for the applicable rate and (b) 0.010% for the commitment fee, based in each case on the targeted greenhouse gas emissions intensity, defined in metric tonnes of CO2 equivalent per tonne metric of aluminum (smelter + refining segments) and on targeted percentages of energy consumption (electricity purchased and consumed by smelters) from renewable sources, including hydro, geothermal, solar, wind and biomass.
The financial covenants require (a) maintenance of an interest expense coverage ratio of at least 4.00 to 1.00, and (b) prior to the date Holdings obtains an investment grade rating ( a “Financial Covenant Reset Event”), a maximum leverage ratio for any period of four consecutive fiscal quarters that is not greater than 3.25 to 1.00. After a financial covenant reset event, the maximum leverage ratio will no longer apply and will be replaced by a total debt to capitalization ratio that does not exceed 0.60 to 1.00. Under the Amended Revolving Credit Agreement, this maximum leverage ratio of 3.25 to 1.00 may be increased to 3.50 to 1.00 in certain circumstances.
The Amended Revolving Credit Agreement contains customary affirmative covenants, negative covenants and events of default substantially comparable to the original Revolving Credit Agreement, but provides additional flexibility, in some cases based on financial ratios, for Holdings and its subsidiaries make restricted payments, to make investments and incur debt, as described in more detail below.
The amended revolving credit agreement provides Holdings with additional flexibility for dividends and other restricted payments by allowing such payments as long as Holdings is in pro forma compliance with the maximum leverage ratio, which is available as long as no event of default continues (provided that the condition of pro forma compliance with the maximum leverage ratio ceases to apply in the event of a reset of the financial covenants).
The Amended Revolving Credit Agreement provides a broad general investment basket for the investments, so long as Holdings is in pro forma compliance with the maximum leverage ratio, which is available so long as no event of default continues (provided that the condition relating to the formal respect of the maximum leverage ratio will cease to apply in the event of a reset event of the financial covenants). This new basket replaces various general investment baskets in the original revolving credit agreement.
The Amended Revolving Credit Agreement also provides additional flexibility for the Holdings and other loan parties to incur unsecured debt, so long as the maximum leverage ratio would be satisfied on a pro forma basis (provided the condition of meeting pro forma maximum leverage ratio . . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation or
Off-balance sheet arrangement of a registrant.
The information set out under the heading “Point 1.01. Entering into a Material Definitive Agreement” of this Current Report on Form 8-K (“Form 8-K”) are incorporated by reference into this Section 2.03.
Section 7.01 Disclosure of FD Rules.
The information contained in this Section 7.01, including the attached Exhibit 99.1, shall be deemed “provided” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended ( the “Exchange Act”), or otherwise subject to the obligations of this section, nor shall it be deemed incorporated by reference in any filing made under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly provided by specific reference in such filing.
Item 9.01 Financial statements and supporting documents.
(d) Exhibits. Exhibit number Description 10.1 Third Amendment and Restatement Agreement, dated as of
June 27, 2022, which includes, as Exhibit A thereto, the Revolving Credit Agreement, dated as of September 16, 2016, as amended as of October 26, 2016, as amended and restated as of November 14, 2017, as amended and restated as of November 21, 2018, as amended as of August 16, 2019, as amended as of April 21, 2020, as amended as of June 24, 2020, as amended as of March 4, 2021and as amended and restated as of June 27, 2022, among Alcoa Corporation, Alcoa Nederland Holding B.V., the lenders and issuers from time to time party thereto, and JPMorgan Chase Bank N.A., as administrative agent for the lenders and issuers. 99.1 Press Release of Alcoa Corporationdated June 29, 2022104 Cover Page Interactive Data File (embedded within the Inline XBRL document) 3
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