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SUBSEQUENT EVENTS
 3 Months Ended
Mar. 31, 2022
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS SUBSEQUENT EVENTS
Initial Public Offering
The registration statement related to the B+L IPO was declared effective on May 5, 2022, and Bausch + Lomb’s common shares began trading on the New York Stock Exchange and the Toronto Stock Exchange, in each case under the ticker symbol “BLCO”, on May 6, 2022. On May 10, 2022, the Selling Shareholder (as previously defined) sold 35,000,000 common shares of Bausch + Lomb at an offering price of $18.00 per share. The net proceeds from the B+L IPO after deducting underwriting commissions and estimated offering expenses were approximately $560 million as of May 10, 2022. In addition, the Selling Shareholder has granted the underwriters an option for a period of 30 days from the date of the B+L IPO to purchase up to an additional 5,250,000 common shares to cover over-allotments at the IPO offering price less underwriting commissions. As of May 10, 2022, the underwriters have not exercised this option. Upon the closing of the B+L IPO (but before exercise of the over-allotment option), the Company directly or indirectly holds 315,000,000 Bausch + Lomb common shares, which represents approximately 90% of Bausch + Lomb’s common shares.
Financing Transactions of Bausch + Lomb
On May 10, 2022, Bausch + Lomb entered into a credit agreement (the “B+L Credit Agreement”, and the credit facilities thereunder, the “B+L Credit Facilities”) providing for term loans of approximately $2,500 million with a five-year term to maturity (the “B+L Term Facility”) and a five year revolving credit facility of approximately $500 million (the “B+L Revolving Credit Facility” or such financing, the “B+L Debt Financing”). The B+L Credit Facilities are secured by substantially all of the assets of Bausch + Lomb and its material, wholly-owned Canadian, U.S., Dutch and Irish subsidiaries, subject to certain exceptions. The term loans are denominated in U.S. dollars, and borrowings under the revolving credit facility will be made available in U.S. dollars, euros, pounds sterling and Canadian dollars. As of May 10, 2022, the B+L Revolving Credit Facility remains undrawn.
Borrowings under the B+L Revolving Credit Facility in (i) U.S. dollars bear interest at a rate per annum equal to, at our option, either: (a) a term SOFR-based rate or (b) a U.S. dollar base rate, (ii) Canadian dollars bear interest at a rate per annum equal to, at our option, either: (a) CDOR or (b) a Canadian dollar prime rate, (iii) euros bear interest at a rate per annum equal to EURIBOR and (iv) pounds sterling bear interest at a rate per annum equal to SONIA (provided, however, that the term SOFR-based rate, CDOR, EURIBOR and SONIA shall be no less than 0.00% per annum at any time and the U.S. dollar base rate and the Canadian dollar prime rate shall be no less than 1.00% per annum at any time), in each case, plus an applicable margin. Term SOFR-based loans are subject to a credit spread adjustment of 0.10%.
The applicable interest rate margins for borrowings under the B+L Revolving Credit Facility are (i) between 0.75% to 1.75% with respect to U.S. dollar base rate or Canadian dollar prime rate borrowings and between 1.75% to 2.75% with respect to SOFR, EURIBOR, SONIA or CDOR borrowings based on the Company’s total net leverage ratio and (ii) after (x) Bausch + Lomb’s senior unsecured non-credit-enhanced long term indebtedness for borrowed money receives an investment grade rating from at least two of S&P, Moody’s and Fitch and (y) the term loan facility has been repaid in full in cash (the “IG Trigger”), between 0.015% to 0.475% with respect to U.S. dollar base rate or Canadian dollar prime rate borrowings and between 1.015% to 1.475% with respect to SOFR, EURIBOR, SONIA or CDOR borrowings based on the Company’s debt rating. In addition, the Company is required to pay commitment fees of 0.25% per annum in respect of the unutilized commitments under the revolving credit facility, payable quarterly in arrears until the IG Trigger and a facility fee between 0.110% to 0.275% of the total revolving commitments, whether used or unused, based on the Company’s debt rating and payable quarterly in arrears. The Company is also required to pay letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on SOFR borrowings under the revolving credit facility on a per annum basis, payable quarterly in arrears, as well as customary fronting fees for the issuance of letters of credit and agency fees.
Borrowings under the term loan facility bear interest at a rate per annum equal to, at our option, either (i) a term SOFR-based rate, plus an applicable margin of 3.25% or (ii) a U.S. dollar base rate, plus an applicable margin of 2.25% (provided, however, that the term SOFR-based rate shall be no less than 0.50% per annum at any time and the U.S. dollar base rate shall not be lower than 1.50% per annum at any time). Term SOFR-based loans are subject to a credit spread adjustment of 0.10%.
Subject to certain exceptions and customary baskets set forth in the B+L Credit Agreement, the Company is required to make mandatory prepayments of the loans under the B+L Term Facility under certain circumstances, including from: (i) 100% of the net cash proceeds of insurance and condemnation proceeds for property or asset losses (subject to reinvestment rights, decrease based on leverage ratios and net proceeds threshold), (ii) 100% of the net cash proceeds from the incurrence of debt (other than permitted debt as described in the B+L Credit Agreement), (iii) 50% of Excess Cash Flow (as defined in the B+L Credit Agreement) subject to decrease based on leverage ratios and subject to a threshold amount and (iv) 100% of net cash proceeds from asset sales (subject to reinvestment rights, decrease based on leverage ratios and net proceeds threshold). These mandatory prepayments may be used to satisfy future amortization.
The amortization rate for the B+L Term Facility is 1.00% per annum and the first installment shall be payable on September 30, 2022. Bausch + Lomb may direct that prepayments be applied to such amortization payments in order of maturity.
Senior Secured Credit Facilities
On May 10, 2022, the Company and certain of its subsidiaries as guarantors entered into that certain Second Amendment to the Fourth Amended and Restated Credit and Guaranty Agreement (the “Second Amendment”). The 2022 Restated Credit Agreement provides for a new term facility with an aggregate principal amount of $2,500 million (the “2027 Term Loan B Facility” and the loans thereunder the “2027 Term Loans”) maturing on February 1, 2027 and a new revolving credit facility of $975 million (the “2027 Revolving Credit Facility”) that will mature on the earlier of February 1, 2027 and the date that is 91 calendar days prior to the scheduled maturity of indebtedness for borrowed money of the Company and BHA in an aggregate principal amount in excess of $1,000 million. After giving effect to the 2022 Restated Credit Agreement, the 2023 Revolving Credit Facility, June 2025 Term Loan B Facility and November 2025 Term Loan B Facility were refinanced (such refinancing, the “Credit Agreement Refinancing”), along with certain of the Company’s existing senior notes, using proceeds of the Credit Agreement Refinancing, the B+L IPO and the B+L Debt Financing and available cash on hand. As of May 10, 2022, the Company has drawn $350 million on the 2027 Revolving Credit Facility.
Borrowings under the 2027 Term Loan B Facility bear interest at a rate per annum equal to, at our option, either: (a) a term SOFR-based rate or (b) a U.S. dollar base rate, in each case, plus an applicable margin (provided, however, that the term SOFR-based rate is expected to be no less than 0.50% per annum at any time and the U.S. dollar base rate is expected to be no less than 1.50% per annum at any time). Borrowings under the 2027 Revolving Credit Facility in: (i) U.S. dollars bear interest at a rate per annum equal to, at the Company’s option, either: (a) a term SOFR-based rate or (b) a U.S. dollar base rate, (ii) Canadian dollars bear interest at a rate per annum equal to, at our option, either: (a) CDOR or (b) a Canadian dollar prime rate and (iii) euros bear interest at a rate per annum equal to EURIBOR (provided, however, that the term SOFR-based rate, CDOR and EURIBOR are expected to be no less than 0.00% per annum at any time and the U.S. dollar base rate and the Canadian dollar prime rate are expected to be no less than 1.00% per annum at any time), in each case, plus an applicable margin. Term SOFR-based loans are subject to a credit spread adjustment ranging from 0.10%-0.25%.
The applicable interest rate margin for borrowings under the 2027 Term Loan B Facility is 5.25% for term SOFR-based loans and 4.25% for U.S. dollar base rate loans. The applicable interest rate margin for borrowings under the 2027 Revolving Credit Facility ranges from 3.75% to 4.25% for term SOFR-based loans and 2.75% to 3.25% for U.S. dollar base rate loans.
In addition, the Company is required to pay commitment fees of 0.25%-0.50% per annum with respect to the unutilized commitments under the 2027 Revolving Credit Facility, payable quarterly in arrears. The Company also is required to pay: (i) letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on term SOFR borrowings under the 2027 Revolving Credit Facility on a per annum basis, payable quarterly in arrears, (ii) customary fronting fees for the issuance of letters of credit and (iii) agency fees.
Subject to certain exceptions and customary baskets set forth in the 2022 Restated Credit Agreement, the Company is required to make mandatory prepayments of the loans under the Senior Secured Credit Facilities under certain circumstances, including from: (i) 100% of the net cash proceeds of insurance and condemnation proceeds for property or asset losses (subject to reinvestment rights, decrease based on leverage ratios and net proceeds threshold), (ii) 100% of the net cash proceeds from the incurrence of debt (other than permitted debt as described in the 2022 Restated Credit Agreement), (iii) 50% of Excess Cash Flow (as defined in the 2022 Restated Credit Agreement) subject to decrease based on leverage ratios and subject to a threshold amount and (iv) 100% of net cash proceeds from asset sales (subject to reinvestment rights, decrease based on leverage ratios and net proceeds threshold). These mandatory prepayments may be used to satisfy future amortization.
The amortization rate for the 2027 Term Loan B Facility is 5.00% per annum and the first installment shall be payable on September 30, 2022. The Company may direct that prepayments be applied to such amortization payments in order of maturity.
The 2022 Restated Credit Agreement permits the incurrence of incremental credit facility borrowings up to the greater of $1,000 million and 40% of Consolidated Adjusted EBITDA (non-GAAP) (as defined in the 2022 Restated Credit Agreement), subject to customary terms and conditions, as well as the incurrence of additional incremental credit facility borrowings subject to, in the case of secured debt, a secured leverage ratio of not greater than 3.50:1.00, and, in the case of unsecured debt, either a total leverage ratio of not greater than 6.50:1.00 or an interest coverage ratio of not less than 2.00:1.00.
The 2022 Restated Credit Agreement provides that Bausch + Lomb initially be a “excluded” subsidiary subject to the terms of the 2022 Restated Credit Agreement covenants, but does not require Bausch + Lomb to guarantee the obligations under the 2022 Restated Credit Agreement. The 2022 Restated Credit Agreement permits the Company to designate Bausch + Lomb as an “unrestricted” subsidiary under the 2022 Restated Credit Agreement and no longer subject to the terms of the covenants thereunder upon achievement of a 7.6x pro forma “Remainco Total Leverage Ratio” Such designation could take place at any time after the B+L IPO. The Credit Agreement Refinancing contains provisions designed to facilitate the separation and distribution of Bausch + Lomb.
Redemption of April 2025 Unsecured Notes
On January 18, 2022, the Company issued conditional notices of redemption to redeem: (i) all April 2025 Unsecured Notes conditioned upon the completion of the Credit Agreement Refinancing and (ii) $370 million in aggregate principal amount of our outstanding 9.000% Senior Unsecured Notes due 2025 (the "December 2025 Unsecured Notes") conditioned upon the receipt of aggregate proceeds from: (i) the B+L IPO, (ii) the B+L Debt Financing, (iii) the Credit Agreement Refinancing and (iv) the issuance of the February 2027 Secured Notes of at least $7,000 million.
In connection with the closing of the B+L IPO, the conditions of the Company’s previously announced redemption of its April 2025 Unsecured Notes were satisfied and the Company discharged the April 2025 Unsecured Notes Indenture using: (i) the proceeds from the issuance of the February 2027 Secured Notes, (ii) the proceeds from the B+L IPO, (iii) the net proceeds from the borrowings under the B+L Debt Financing and (iv) cash on hand. On May 10, 2022, the Company caused sufficient funds for the redemption in full of its April 2025 Unsecured Notes at a redemption price of 101.021% of the principal amount then outstanding to be irrevocably deposited with the Bank of New York Mellon, N.A., as trustee under the April 2025 Unsecured Notes Indenture, and the April 2025 Unsecured Notes Indenture was discharged. The April 2025 Unsecured Notes will be redeemed on May 16, 2022.
On May 10, 2022, the Company notified the Trustee and holders of its outstanding December 2025 Unsecured Notes that the conditions to its previously announced redemption would not be satisfied, and the conditional redemption was cancelled.
In connection with the closing of the B+L IPO, the discharge of the 6.125% Notes Indenture and the related release in respect of the 2018 Restated Credit Agreement as described above, the guarantees and related security provided by Bausch + Lomb and its subsidiaries in respect of the existing senior notes of the Company and BHA were released.