Item 1.01 Entry into a Material Definitive Agreement
In order to further strengthen its liquidity position, maximize its fortress
balance sheet and maintain financial flexibility, on May 11, 2020,
Williams-Sonoma, Inc. (the "Company") entered into an amendment (the "Credit
Facility Amendment") of its $300,000,000 unsecured term loan facility to extend
its maturity date by one year and an agreement (the "364-Day Credit Agreement")
for an additional $200,000,000 unsecured revolving line of credit.
The Credit Facility Amendment to its Seventh Amended and Restated Credit
Agreement, dated as of January 8, 2018 (the "Existing Credit Agreement" and, as
amended by the Credit Facility Amendment, the "Amended Credit Agreement") with
Bank of America, N.A., as administrative agent, letter of credit issuer and
swingline lender, Wells Fargo Bank, National Association, as syndication agent,
and the lenders party thereto, among other changes, extends the maturity date
and amends interest rates of the $300,000,000 unsecured term loan facility under
the Existing Credit Agreement. The Credit Facility Amendment maintains the
maturity date and interest rate of the $500,000,000 unsecured revolving line of
credit. As of May 11, 2020, the Company had the $300,000,000 term loan
outstanding and the $500,000,000 revolving loan outstanding under the Amended
Credit Agreement. The 364-Day Credit Agreement, by and among the Company, Bank
of America, N.A., as administrative agent, and the lenders party thereto,
provides for an additional $200,000,000 unsecured revolving line of credit. As
of May 11, 2020, the Company had not drawn on any loans under the 364-Day Credit
Agreement.
Under the Amended Credit Agreement, the Company continues to be able to elect
interest rates on its revolving borrowings calculated by reference to Bank of
America's prime rate (or, if greater, the average rate on overnight federal
funds plus one-half of one percent or a daily rate equal to one-month LIBOR plus
one percent), plus a margin based on the Company's leverage ratio ranging from
0% to 0.775%, or LIBOR plus a margin based on the Company's leverage ratio
ranging from 0.910% to 1.775%. The Company may elect interest rates on its
amended term loan borrowing subject to the formula above, except that the
applicable margins for prime rate loans range from 0.750% to 1.500%, and, for
LIBOR loans, 1.750% to 2.500%. The revolving loans, swingline loans and
revolving commitments under the Amended Credit Agreement continue to mature on
January 8, 2023, and the term loan under the Amended Credit Agreement now
matures on January 8, 2022. Pursuant to the Amended Credit Agreement, the
Company pays certain customary fees to the administrative agent and the lenders.
Under the 364-Day Credit Agreement, the Company may elect interest rates on its
revolving borrowings calculated by reference to Bank of America's prime rate
(or, if greater, the average rate on overnight federal funds plus one-half of
one percent or a daily rate equal to one-month LIBOR plus one percent), plus a
margin based on the Company's leverage ratio ranging from 0.750% to 1.500%, or
LIBOR plus a margin based on the Company's leverage ratio ranging from 1.750% to
2.500%. The 364-Day Credit Agreement matures on May 10, 2021. Pursuant to the
364-Day Credit Agreement, the Company pays certain customary fees to the
administrative agent and the lenders.
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The credit facilities under the Amended Credit Agreement and the 364-Day Credit
Agreement (the "Credit Facilities") contain certain restrictive loan covenants,
including, among others, a financial covenant requiring a maximum leverage ratio
(funded debt adjusted for lease and rent expense to earnings before interest,
income tax, depreciation, amortization and rent expense), and covenants limiting
the Company's and its subsidiaries' ability to incur indebtedness, grant liens,
make acquisitions, merge or consolidate, and dispose of assets. The Company's
obligations under the Credit Facilities are guaranteed by certain of the
Company's U.S. subsidiaries.
The Credit Facilities contain events of default that include, among others,
non-payment of principal, interest or fees, inaccuracy of representations and
warranties, violation of covenants, bankruptcy and insolvency events, material
judgments, cross-defaults to material indebtedness, ERISA defaults and events
constituting a change of control. The occurrence of an event of default will
increase the applicable rate of interest by 2% and could result in the
acceleration of the Company's obligations under the Credit Facilities, and an
obligation of any or all of the Company's U.S. subsidiaries that have guaranteed
the Credit Facilities to pay the full amount of the Company's obligations under
the Credit Facilities.
The lenders and their affiliates have engaged in, and may in the future engage
in, banking and other commercial dealings in the ordinary course of business
with the Company or the Company's affiliates. They have received, or may in the
future receive, customary fees and commissions for these transactions. In
particular, Bank of America, N.A. and Wells Fargo Bank, National Association,
lenders under the Credit Facilities, are parties to certain reimbursement
agreements in connection with the Company's commercial letter of credit
reimbursement facility.
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