Item 1.01. Entry into a Material Definitive Agreement
On December 9, 2021 (Effective Date), United States Cellular Corporation (UScellular) entered into a $300 million Senior Term Loan Credit Agreement (Credit Agreement) by and among UScellular as Borrower, Toronto Dominion (Texas) LLC as Administrative Agent, and the other lenders party thereto and identified therein.
The Credit Agreement provides UScellular with a $300 million senior term loan credit facility for general corporate purposes and to support UScellular's 5G deployment, including spectrum acquisition.
Borrowings under the Credit Agreement bear interest, at UScellular’s option, either at a secured overnight financing rate (SOFR) or at an alternative base rate, plus, in each case, an applicable margin.
The two financial covenants described below are included in the Credit Agreement:
1.Consolidated Interest Coverage Ratio (the ratio of Consolidated EBITDA to Consolidated Interest Charges) may not be less than 3.00 to 1.00 as of the end of any fiscal quarter.
2.Consolidated Leverage Ratio (the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA) may not be greater than 3.75 to 1.00 as of the end of any fiscal quarter.
The term loan under the Credit Agreement is unsecured, subject to certain limitations. Additionally, certain wholly-owned subsidiaries are guarantors under the Credit Agreement.
The Credit Agreement includes representations and warranties, covenants, events of default and other terms and conditions that are substantially similar to UScellular’s existing term loan and revolving credit agreements.
A Change in Control, as such term is defined in the Credit Agreement, of UScellular would constitute a default and would enable the required lenders and the Administrative Agent to require all borrowings outstanding under the Credit Agreement to be repaid.
The continued availability of the Credit Agreement requires UScellular to comply with certain negative and affirmative covenants, maintain the above financial ratios and provide representations on certain matters at the time of each borrowing.
The Credit Agreement permits UScellular to make one or more borrowings aggregating up to $300 million from the Effective Date through the three-month anniversary of the Effective Date, or March 9, 2022.
Amounts borrowed under the Credit Agreement will be due and payable in quarterly installments at a rate of 0.625% of the initial outstanding principal balance from March 2023 through December 2023; at a rate of 1.25% of the initial outstanding principal balance from March 2024 through December 2025; and at a rate of 2.50% of the initial outstanding principal balance from March 2026 through maturity date. The remaining unpaid balance will be due and payable in full on July 20, 2026.
The foregoing brief description is qualified by reference to the copy of the Credit Agreement attached hereto as Exhibit 4.1, which is incorporated herein by reference, and which identifies all the lenders thereto.
Some of the lenders and/or agents under the Credit Agreement and/or their affiliates may have various relationships with UScellular, its parent, Telephone and Data Systems, Inc. (TDS), and their subsidiaries involving banking or other financial services, including checking, cash management, brokerage, lending, investment banking, depository, indenture trustee and/or other services, including serving as a lender under the Credit Agreement or other TDS and/or UScellular credit agreements.
In connection with the Credit Agreement, UScellular, TDS and Toronto Dominion (Texas) LLC entered into a Subordination Agreement on December 9, 2021, the form of which is attached as Exhibit F to the Credit Agreement. Pursuant to this Subordination Agreement, (a) any consolidated funded indebtedness from UScellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness (other than Refinancing Indebtedness as defined in the Credit Agreement) in excess of $105 million, and (ii) Refinancing Indebtedness in excess of $250 million, will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under the Credit Agreement. As of the date of this Form 8-K, there is no outstanding funded indebtedness of UScellular that is subordinated pursuant to the Subordination Agreement.