Item 1.01. Entry into a Material Definitive Agreement
On December 17, 2021 (Effective Date), United States Cellular Corporation (UScellular) entered into a $150 million Credit Agreement (Credit Agreement) by and among UScellular as Borrower, Citibank, N.A. as Administrative Agent, Global Coordinator, Mandated Lead Arranger and a Lender, Export Development Canada as Mandated Lead Arranger and a Lender, and the other lenders from time to time party thereto.
The Credit Agreement provides UScellular with a $150 million term loan credit facility to finance (or refinance) the purchase of goods and services (including goods and services purchased prior to the Effective Date) from Nokia of America Corporation.
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 $150 million from the Effective Date to the earliest of (a) March 17, 2022, (b) the date of termination of the commitment, and (c) the date of termination of the commitment of each lender to make loans.
Amounts borrowed under the Credit Agreement will be due and payable on the earlier of (i) the date of acceleration of the obligations and (ii) the five year anniversary of the first borrowing.
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 Citibank, N.A. entered into a Subordination Agreement on December 17, 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.