maintain the following financial covenants: (i) a maximum consolidated leverage ratio not greater than (x) commencing with the first fiscal quarter ending at least fifteen (15) months after the Closing Date and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least twenty-four (24) months after the Closing Date, 4.50 to 1.00, and (y) commencing with the first fiscal quarter ending at least twenty-four (24) months after the Closing Date and thereafter, 4.00 to 1.00; and (ii) a minimum current ratio (as defined under and calculated in accordance with Non-ABL Credit Agreement) not less than 1.25 to 1.00. In addition, until the Commercial Bank Term Loan Facility is paid in full, the Company must maintain a maximum debt to capitalization ratio no greater than (1) commencing with the first fiscal quarter ending after the Closing Date and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least twenty-four (24) months after the Closing Date, 70%, (2) commencing with the first fiscal quarter ending at least twenty-four (24) months after the Closing Date and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least forty-eight (48) months after the Closing Date, 65%, and (3) commencing with the first fiscal quarter ending at least forty-eight (48) months after the Closing Date and thereafter, 60%.
The Non-ABL Credit Agreement contains certain customary representations, warranties, and affirmative and negative covenants of the Company and its subsidiaries that restrict the Company’s and its subsidiaries’ ability to take certain actions, including, incurrence of indebtedness, creation of liens, mergers or consolidations, capital expenditures, dispositions of assets, repurchase or redemption of capital stock and certain types of indebtedness, making certain investments, entering into certain transactions with affiliates or changing the nature of the Company’s business. The obligations under the Non-ABL Credit Agreement may be accelerated or the commitments terminated upon the occurrence of events of default under the Non-ABL Credit Agreement, which include payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults arising in connection with changes in control, and other customary events of default.
ABL Credit Agreement
On the Closing Date, the Company also entered into an amendment (the “ABL Amendment”) of its ABL Credit Agreement dated July 26, 2019, among the Company, as borrower, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended, the “ABL Credit Agreement”), the primary purpose of which was to permit the Transaction and entry into the Non-ABL Credit Agreement. In connection with the ABL Amendment, among other things, the maximum commitment of the lenders (subject to borrowing base limitations) under the ABL Credit Agreement was increased from $275 million to $375 million, $120 million of which was outstanding after giving effect to the closing of the Transaction and $3.7 million of which was utilized for outstanding but undrawn letters of credit. In addition, pursuant to the ABL Amendment, the debt, liens and dispositions covenants were amended.
The foregoing description of the Non-ABL Credit Agreement and the ABL Amendment are qualified in their entirety by reference to the Non-ABL Credit Agreement which is attached hereto as Exhibit 10.1, and the ABL Amendment which is attached hereto as Exhibit 10.2, each of which is incorporated by reference herein.
Item 2.01. Completion of Acquisition or Disposition of Assets.
As previously disclosed in the Company’s Current Report on Form 8-K filed on February 21, 2024, on February 20, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Graphic Packaging International, LLC (“GPK”), a wholly owned subsidiary of Graphic Packaging Holding Company.
The closing of the transactions contemplated by the Purchase Agreement occurred on May 1, 2024 (the “Closing Date”). Pursuant to the Purchase Agreement, on the Closing Date, the Company acquired certain assets of GPK’s consumer packaging business operating out of GPK’s paperboard mill and associated facilities in Augusta, Georgia (the “Mill Facility”) composed of the manufacturing, marketing and/or sale of paperboard produced at the Mill Facility (such acquisition and related transactions contemplated by the Purchase Agreement, the “Transaction”). On the Closing Date, the Company paid approximately $700 million in cash, subject to adjustments for inventory and other assets.
The foregoing description of the Purchase Agreement and the Transaction does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 21, 2024 and is 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 description set forth under Item 1.01 of this Form 8-K is incorporated by reference herein in its entirety.
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