UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
INFORMATION TO BE INCLUDED IN THE REPORT
| Item 1.01. | Entry into a Material Definitive Agreement. |
On June 17, 2022, Quaker Chemical Corporation (the “Company”), and its wholly-owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S. Dollar swing line lender and letter of credit issuer (the “Administrative Agent”), Bank of America Europe Designated Active Company, as Euro Swing Line Lender, certain guarantors and other lenders (the “Lenders”) entered into an amendment (the “Amended Credit Agreement”) to its existing credit agreement among the Company, its wholly-owned subsidiary, Quaker Chemical B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S. Dollar swing line lender and letter of credit issuer, and the other lenders party thereto, entered into on August 1, 2019, as amended (the “Existing Credit Agreement”). Terms not otherwise defined in this Current Report on Form 8-K, shall have their respective meanings ascribed to them in the Amended Credit Agreement.
The Amended Credit Agreement amends the Existing Credit Agreement to, among other things, (i) establish (A) a new senior secured euro-denominated term loan facility for Quaker Houghton B.V. in an aggregate principal amount equal to the amount in Euros that is equivalent to $150,000,000 (the “Dutch Term Loan”), (B) a new senior secured U.S. dollar-denominated term loan facility for the Company in an aggregate principal amount of $600,000,000 and (C) a new senior secured revolving credit facility for the Company in an aggregate principal amount of $500,000,000, (ii) use the proceeds of the New Term Facilities and borrowings under the New Revolving Credit Facility to repay in full all outstanding loans under the Existing Credit Agreement, together with any unpaid interest and fees in respect thereof that accrue to but not including the Amendment No. 3 Effective Date, terminate the revolving credit commitments under the Existing Credit Agreement, and to fund, among other things, additional working capital or other liquidity needs, (iii) eliminate the requirement in the Existing Credit Facility that Material Subsidiaries that are foreign subsidiaries must guaranty the Dutch Term Loan and (iv) effect certain other changes to the Existing Credit Agreement as set forth in the Amended Credit Agreement (collectively, the “Amended Facility”). The Company has the right to increase the amount of the Amended Facility by an aggregate amount not to exceed the greater of (i) $300 million and (ii) 100% of Consolidated EBITDA, subject to certain conditions, including the agreement to provide financing by any Lender providing any such increase.
U.S. Dollar-denominated borrowings under the Amended Facility bear interest, at the Company’s election, at the Base Rate or Term SOFR plus an Applicable Rate ranging from 1.000% to 1.750% for Term SOFR Loans and from 0.000% to 0.750% for Base Rate Loans, depending upon the Company’s Consolidated Net Leverage Ratio. Loans based on Term SOFR also include an adjustment equal to 0.10% per annum. Borrowings under the Amended Facility denominated in currencies other than U.S. Dollars bear interest at the Alternative Currency Term Rate plus the Applicable Rate ranging from 1.000% to 1.750%. The Amended Credit Agreement matures on June 17, 2027 and, at that time, all of the debt outstanding thereunder will be due and payable.
The Amended Facility is guaranteed by certain of the Company’s domestic subsidiaries and is secured by first priority liens on substantially all of the assets of the Company and the subsidiary guarantors, subject to certain customary exclusions. Quaker Houghton B.V. is liable only for the borrowings made to it by the Lenders under the Amended Facility.
The Amended Credit Agreement contains affirmative and negative covenants, financial covenants and events of default that are customary for agreements of this nature. The Amended Credit Agreement contains a number of customary business covenants, including without limitation restrictions on (a) the incurrence of additional indebtedness by the Company or certain of its subsidiaries, (b) investments in and acquisitions of other businesses, lines of business and divisions by the Company or certain of its subsidiaries, (c) the making of dividends or capital stock purchases by the Company or certain of its subsidiaries and (d) dispositions of assets by the Company or certain of its subsidiaries. Dividends and share repurchases are permitted in annual amounts not exceeding the greater of $75,000,000 annually and 25% of Consolidated EBITDA if there is no Default. Any other Restricted Payments may be made if there is no Default and if the Consolidated Net Leverage Ratio is less than 2.50 to 1.00.
Financial covenants contained in the Amended Credit Agreement include a Consolidated Interest Coverage Ratio test and a Consolidated Net Leverage Ratio test. Generally, the Consolidated Net Leverage Ratio at the end of a quarter may not be greater than 4.00 to 1.00, subject to a permitted increase during a four quarter period after certain acquisitions. The Company has the option of replacing the Consolidated Net Leverage Ratio test with a Consolidated Senior Net Leverage Ratio test if the Company issues certain types of unsecured notes, subject to certain customary limitations. Customary events of default in the Amended Credit Agreement include without limitation defaults for non-payment, breach of representations and warranties, non-performance of covenants, cross-defaults, insolvency, and a change of control of the Company in certain circumstances. The occurrence of an event of default under the Amended Credit Agreement could result in all loans and other obligations becoming immediately due and payable and the Amended Facility being terminated.
The Administrative Agent and certain of the Lenders party to the Amended Credit Agreement have provided, and may in the future provide, normal banking, investment banking and/or advisory services for the Company and/or its affiliates from time to time, for which they have received, or may in the future receive, customary fees and expenses.
The foregoing description of the Amended Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amended Credit Agreement, which is filed as Exhibit 10.1 hereto 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 information in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.
| Item 9.01. | Financial Statements and Exhibits. |
The following exhibits are included as part of this report:
| Exhibit No. | Description |
| 10.1 | Amendment No. 3, dated as of June 17, 2022, to the Credit Agreement, dated as of August 1, 2019, as amended. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| QUAKER CHEMICAL CORPORATION | ||
| Date: June 21, 2022 | By: | /s/ Shane Hostetter |
|
Shane Hostetter Senior Vice President and Chief Financial Officer | ||