Item 1.01. Entry into a Material Definitive Agreement.
364-Day Term Loan Credit Agreement
On January 3, 2023, Brown-Forman Corporation (the “Company”) entered into a $600,000,000 senior unsecured 364-day term loan credit agreement (the “Term Loan Agreement”) with the lenders party thereto, U.S. Bank National Association, as Administrative Agent, Bank of America, N.A., Citibank, N.A. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and U.S. Bank National Association, BofA Securities, Inc., Citibank N.A. and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers and Joint Bookrunners. On January 3, 2023, the lenders advanced loans under the Term Loan Agreement in the amount of $400,000,000. The Term Loan Agreement permits one additional borrowing. Borrowings under the Term Loan Agreement mature on January 2, 2024, and, at the option of the Company, can be prepaid before that date without penalty or premium.
The borrowings under the Term Loan Agreement will be used for working capital and general corporate purposes, including, without limitation, acquisitions, including the acquisition of the Diplomático Business (as defined and discussed below), share repurchases, distributions to shareholders and/or the repayment of amounts owing in respect of certain notes issued by the Company that are due January 2023.
Borrowings under the Term Loan Agreement will bear interest at rates equal to, (1) for each Term SOFR loan, the sum of the term SOFR screen rate for the applicable Interest Period plus the applicable rate plus an adjustment of 0.10% and (2) for each ABR Loan, at the alternate base rate. The alternate base rate equals, for any day, a rate of interest per annum equal to the highest of (a) zero percent, (b) the Prime Rate, (c) the sum of the Federal Funds Effective Rate plus 0.50% per annum and (d) the Adjusted Term SOFR Screen Rate (without giving effect to the applicable rate) for a one-month Interest Period plus 1.00%.
The Term Loan Agreement contains representations, warranties and terms and conditions customary for agreements of this type, including covenants with regards to mergers, consolidations and asset sales, certain incurrence of secured indebtedness and sale and leaseback transactions. The Term Loan Agreement also provides for certain events of default, including failure to observe covenants under the Term Loan Agreement, an event of default under the Five-Year Credit Agreement (as defined below) and any other material indebtedness and certain bankruptcy related events. The occurrence of any event of default under the Term Loan Agreement could result in the borrowings thereunder becoming due and immediately repayable.
The foregoing summary of the Term Loan Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Term Loan Agreement, a copy of which is attached as Exhibit 10.1 hereto and is incorporated herein by reference. Capitalized terms used in this “364-Day Term Loan Credit Agreement” section but not defined herein shall have the respective meanings set forth in the Term Loan Agreement.
Revolving Five-Year Credit Agreement Amendment
On January 3, 2023, the Company entered into Amendment No. 2 (the “Amendment”) to its Amended and Restated Five-Year Credit Agreement, dated as of November 10, 2017 (as previously amended, the “Five-Year Credit Agreement”), with U.S. Bank National Association, as Administrative Agent, and the other lenders party thereto.
The Amendment, among other things, updates the benchmark interest rate provisions to replace LIBOR with Term SOFR as the reference rate for purposes of calculating interest under the Five-Year Credit Agreement.
Except as amended by the Amendment, the remaining terms of the Five-Year Credit Agreement remain in full force and effect. The material terms of the Five-Year Credit Agreement are described in the Company’s Current Reports on Form 8-K (File No. 001-00123) filed with the Securities and Exchange Commission (the “SEC”) on November 13, 2017 and November 12, 2021.
The foregoing summary of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment, a copy of which is attached as Exhibit 10.2 hereto and is incorporated herein by reference. Capitalized terms used in this “Revolving Five-Year Credit Agreement Amendment” section but not defined herein shall have the respective meanings set forth in the Amendment.
From time to time, the Company and the respective lenders under the Term Loan Agreement and the Five-Year Credit Agreement (or affiliates of such lenders) may engage in other transactions involving financial services, including interest rate swap or hedging arrangements, repurchases of shares of the Company’s common stock, commercial paper or other debt transactions, cash management services, financial advisory services, corporate trust services, investment banking services and commercial banking services.