Item 1.01Entry into a Material Definitive Agreement.
On March 30, 2020, The Toro Company (“TTC”) entered into a term loan credit agreement with certain lenders, Bank of America, N.A., as administrative agent, and U.S. Bank National Association, as syndication agent (the “Term Loan”). The Term Loan provides for an aggregate credit commitment of up to $190 million to TTC pursuant to a three-year unsecured term loan credit facility. TTC entered into the Term Loan (i) to refinance certain of its outstanding borrowings incurred in connection with TTC’s acquisition of Venture Products, Inc. that was completed on March 2, 2020 and borrowed under its revolving credit agreement dated as of June 19, 2018, with certain lenders, Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer, and Wells Fargo Bank, National Association, as syndication agent and (ii) as a precautionary measure in order to increase its liquidity and preserve financial flexibility in light of the current uncertainty in the global financial and commercial markets as a result of the coronavirus (“COVID-19”) pandemic (the “Borrowing Purpose”).
At the option of TTC, the Term Loan will bear interest at a variable rate generally based on LIBOR or an alternative variable rate based on the highest of the Bank of America prime rate, the federal funds rate or a rate generally based on LIBOR, in each case depending on the leverage ratio (as measured quarterly and defined as the ratio of (a) total indebtedness to (b) consolidated EBIT (earnings before interest and taxes) plus depreciation and amortization expense) and debt rating of TTC, each as identified in the Term Loan. Interest is payable quarterly in arrears. Beginning with the last business day of March 2021, TTC will make quarterly amortization payments on the Term Loan equal to (a) 5.0% for the first four payments and (b) 7.50% thereafter, in each case, of the aggregate principal amount of the Term Loan.
The Term Loan contains customary covenants regarding TTC and its subsidiaries, including, without limitation: financial covenants, such as the maintenance of minimum interest coverage and maximum leverage ratios; and negative covenants, which, among other things, limit dividends, disposition of assets, consolidations and mergers, liens and other matters customarily restricted in such agreements. Most of these restrictions are subject to certain minimum thresholds and exceptions. The Term Loan also contains customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, and change of control.
BofA Securities, Inc. served as lead arranger and bookrunner for the Term Loan, for which they each received customary compensation. In addition, the Administrative Agent, the Syndication Agent and certain of the other lenders and their respective affiliates have in the past performed, and may in the future from time to time perform, investment banking, financial advisory, lending and/or commercial banking services for TTC and its subsidiaries, for which service they have in the past received, and may in the future receive, customary compensation and reimbursement of expenses.
The foregoing description of the Term Loan is a summary of the material terms of the Term Loan, does not purport to be complete and is qualified in its entirety by reference to the complete text of the Term Loan, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.