Item 1.01
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Entry into a Material Definitive Agreement.
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(a) Senior Unsecured Notes.
On July 30, 2020, Lennox International Inc. (the “Company”) completed an offering of $600,000,000, in the aggregate, of its senior notes in two separate tranches: (i) $300,000,000 aggregate principal amount of the Company’s 1.350% Notes due 2025 (the “2025 Notes”) and (ii) $300,000,000 aggregate principal amount of the Company’s 1.700% Notes due 2027 (the “2027 Notes” and, together with the 2025 Notes, the “Notes”).
The Notes were issued pursuant to the Indenture, dated as of May 3, 2010 (as amended, supplemented or otherwise modified to the date hereof, the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as further supplemented by the Ninth Supplemental Indenture, dated as of July 30, 2020 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), among the Company, the guarantors party thereto (the “Guarantors”) and the Trustee. The Notes are guaranteed on a senior unsecured basis by the Guarantors.
The 2025 Notes will mature on August 1, 2025 and the 2027 Notes will mature on August 1, 2027. The Notes will bear interest at the rates set forth above. Interest on the Notes is payable on February 1 and August 1 of each year, beginning on February 1, 2021 until their respective maturities. Before July 1, 2025 (the “2025 Par Call Date”) and before June 1, 2027 (the “2027 Par Call Date”), the Company may, at any time, redeem the 2025 Notes and the 2027 Notes, respectively, at a redemption price equal to the greater of 100% of the principal amount and the “make whole” price described in the Indenture, plus accrued and unpaid interest, assuming for such purpose that the 2025 Notes and the 2027 Notes matured on the 2025 Par Call Date and the 2027 Par Call Date, respectively. On or after the 2025 Par Call Date and the 2027 Par Call Date, the Company may redeem the 2025 Notes and the 2027 Notes, respectively, at par, plus accrued and unpaid interest.
The Company received net proceeds from the issuance of the Notes of approximately $593.7 million after deducting the underwriters’ discount and estimated expenses. The Company intends to use the net proceeds from the sale of the Notes to repay indebtedness under the Company’s domestic credit facility and for general corporate purposes, which may include repurchasing shares of the Company’s common stock.
Upon the occurrence of both (a) a change of control of the Company or the first public announcement of a change of control by the Company and (b) within a specified period in relation to the change of control or the announcement of the change of control, a downgrade of the Notes by either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services to a rating below an investment grade rating, the Company may be required to purchase some or all of the Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase.
The Notes are subject to the covenants in the Indenture, which include limitations on liens, limitations on sale and leaseback transactions and limitations on mergers, consolidations and transfers of substantially all of the Company’s assets.
The Indenture contains customary events of default, including: (a) failure to pay principal or premium, if any, on the Notes when due; (b) failure to pay any interest on the Notes for 30 days after the interest becomes due; (c) failure to perform, or breach of, any other covenant in the Indenture for 90 days after written notice thereof; (d) the guarantee of any Guarantor ceases to be in effect and enforceable in accordance with its terms; (e) acceleration of at least $75 million of indebtedness of the Company or any Guarantor, as the result of an event of default, as defined in an indenture or instrument under which such indebtedness is outstanding, if such acceleration is not rescinded or annulled within 30 days after notice thereof has been given; and (f) specified events of bankruptcy, insolvency or reorganization involving the Company or any Guarantor.
The foregoing summary of the Base Indenture, the Supplemental Indenture and the Notes is qualified in its entirety by reference to the full text of the Base Indenture, the Supplemental Indenture and the Notes, which are included as Exhibit 4.1, Exhibit 4.2, Exhibit 4.3 and Exhibit 4.4 hereto and are incorporated herein by reference.
(b) Credit Facility Restatement.
On July 30, 2020, the Company entered into the Seventh Amended and Restated Credit Facility Agreement (the “2020 Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto, which amended, restated and replaced the Sixth Amended and Restated Credit Facility Agreement, dated as of August 30, 2016 (as amended, the “2016 Credit Agreement”), among the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto.