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AT&T INC.

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AT&T INC. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Financial Statements and Exhibits (form 8-K)

06/10/2021 | 06:03am EDT

ITEM 1.01 Entry into a Material Definitive Agreement.

Spinco Term Loan

On June 4, 2021 (the "Effective Date"), Magallanes, Inc. ("Spinco"), a Delaware corporation and wholly owned subsidiary of AT&T Inc. (the "Company"), entered into a $10 billion Term Loan Credit Agreement (the "Spinco Term Loan") with JPMorgan Chase Bank, N.A., as agent, and a syndicate of lenders. In connection with the entry into the Spinco Term Loan, the "Tranche 2 Commitments" in the aggregate amount of $10 billion under the $41.5 billion commitment letter, dated as of May 17, 2021 (the "Bridge Commitment Letter"), among Spinco, the lenders named therein and JPMorgan Chase Bank, N.A., as agent, have been reduced to zero. The "Tranche 1 Commitments" under the Bridge Commitment Letter in the aggregate amount of $31.5 billion remain in effect.

In the event advances are made under the Spinco Term Loan, those advances would be used solely to finance a portion of the cash distribution by Spinco to the Company in connection with a transaction pursuant to which the Company will transfer the business, operations and activities that constitute the WarnerMedia segment of the Company (the "Spinoff Business"), subject to certain exceptions, to Spinco (the "Separation") and pay fees and expenses related to the Separation and certain other transactions relating to the Separation, including (i) a distribution by the Company to its stockholders of the shares of common stock, par value $0.01 per share, of Spinco held by the Company by way of either a pro rata dividend or an exchange offer (the "Distribution") and, after the Distribution and (ii) a merger of Drake Subsidiary, Inc. ("Merger Sub"), a Delaware corporation and wholly owned subsidiary of Discovery, Inc., a Delaware corporation ("Discovery"), with and into Spinco, with Spinco as the surviving entity and a wholly owned subsidiary of Discovery (the "Combination" and, together with the Separation and Distribution and the other related transactions as previously disclosed in a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on May 20, 2021, collectively, the "Transactions").

Under the Spinco Term Loan, there are two tranches (Tranche 1 and Tranche 2) of commitments in an aggregate amount of $3 billion and $7 billion, respectively.

The obligations of the lenders under the Spinco Term Loan to provide advances will terminate on the earliest of (i) the termination of the Agreement and Plan of Merger, dated May 17, 2021 (the "Merger Agreement"), by and among the Company, Spinco, Discovery, and Merger Sub in accordance with its terms, (ii) July 15, 2023, (iii) the consummation of the Distribution with or without the funding of the loans under the Spinco Term Loan (after giving effect to any such loans funded) and (iv) the date of termination in full of the Tranche 1 commitments and Tranche 2 commitments pursuant to the terms of the Spinco Term Loan (the period from the Effective Date to such termination date, the "Availability Period").

Advances would bear interest, at Spinco's option, either:



     •    at a variable annual rate equal to: (1) the highest of (a) 0.5% per annum
          above the federal funds rate (b) the prime rate quoted by The Wall Street
          Journal, and (c) the London interbank offered rate applicable to dollars
          for an interest period of one month plus 1.00%, plus (2) an applicable
          margin, as set forth in the Spinco Term Loan (the "Applicable Margin for
          Base Rate Advances"); or




     •    at a rate equal to: (i) the London interbank offered rate applicable to
          dollars for an interest period of one, three or six months, as applicable
          (the "LIBO Screen Rate"), or, if the LIBO Screen Rate is not available,
          an interpolated rate determined by the agent pursuant to the Spinco Term
          Loan (the "LIBO Interpolated Rate" and, together with the LIBO Screen
          Rate, as applicable, the "LIBO Rate") for the applicable interest period,
          plus (ii) an applicable margin, as set forth in the Spinco Term Loan (the
          "Applicable Margin for Eurocurrency Rate Advances" and, together with the
          Applicable Margin for Base Rate Advances, the "Applicable Margin").

The Applicable Margin for Eurocurrency Rate Advances of the Tranche 1 loans will be 0.750% to 1.500% per annum depending on Spinco's unsecured long-term debt ratings (the "Debt Ratings"). The Applicable Margin for Eurocurrency Rate Advances of the Tranche 2 loans will be 0.875% to 1.625% per annum depending on the Debt Ratings. The Applicable Margin for Base Rate Advances will be equal to the greater of (x) 0.00% and (y) the relevant Applicable Margin for Eurocurrency Rate Advances minus 1.00% per annum, depending on the Debt Ratings.

Commencing on August 15, 2021, Company will also pay a ticking fee ("Ticking Fee") of 0.075% to 0.275% of the commitment amount per annum, depending on the Debt Ratings, until the end of the Availability Period.

In the event the Debt Ratings are split by S&P and Moody's, then the Applicable Margin and Ticking Fee (collectively, the "Applicable Rates") will be determined by the higher of the two ratings, except that in the event the lower of such ratings is more than one level below the higher of such ratings, then the Applicable Rates will be determined based on the level that is one level below the higher of such ratings. In the event that Spinco has only one Debt Rating by S&P or Moody's, the Applicable Rates will be determined based the level that is one level lower than that of such Debt Rating.

--------------------------------------------------------------------------------

The availability of advances under the Spinco Term Loan are conditioned on the following (the first date all the following conditions are satisfied or waived, the "Closing Date"):



     •    the delivery of an officer's certificate from Spinco certifying that
          (a) the conditions to the Combination set forth in the Merger Agreement
          and conditions to the Contribution and Distribution set forth in the
          Contribution and Distribution set forth in the Separation and
          Distribution Agreement, dated May 17, 2021 (the "Separation Agreement"),
          by and among the Company, Spinco and Discovery, in each case, other than
          such conditions that by their nature are to be satisfied upon the closing
          of such transaction, have been satisfied or waived or are expected to be
          satisfied and waived on the Closing Date or one business day thereafter;




  •   the absence of a material adverse effect of Discovery;




  •   payment of fees and expenses due under the Spinco Term Loan;




     •    delivery of certain historical and pro forma financial information of the
          Spinoff Business and Discovery;




     •    the absence of material breaches of certain representations and
          warranties under the Spinco Term Loan and the Merger Agreement; and




  •   certain customary documentation requirements.

The outstanding aggregate principal amount of any Tranche 1 loans made to Spinco will be due and payable 18 months after the Closing Date. The outstanding aggregate principal amount of any Tranche 2 loans made to Spinco will be due and payable 3 years after the Closing Date.

The Spinco Term Loan contains certain representations and warranties and covenants, including limitations on liens, investments, indebtedness, dispositions, transactions with affiliates, dividends and other restricted payments and certain burdensome agreements and financial maintenance covenants that Spinco will maintain (i) a consolidated interest coverage ratio (as defined in the Spinco Term Loan) of no less than 3.00 to 1.00 and (ii) a consolidated leverage ratio (as defined in the Spinco Term Loan) of (a) from and after the last day of the first full fiscal quarter following the Closing Date to the measurement period (as defined the Spinco Term Loan) ending on the last day of the first full fiscal quarter after the first anniversary of the Closing Date, no more than 5.75 to 1.00, (b) from and after the measurement period ending on the last day of the first full fiscal quarter after the first anniversary of the Closing Date to the measurement period ending on the last day of the first full quarter after the second anniversary of the Closing Date, 5.0:1.00 and (c) thereafter, 4.50:1.00.

Events of default under the Spinco Term Loan, which, if occurring after the advances are made, would result in the acceleration of or permit the lenders to accelerate, as applicable, required payment under the Spinco Term Loan, include, among others, nonpayment of principal, interest or other amounts, failure to perform covenants, inaccuracy of representations or warranties in any material respect, cross-defaults with other material indebtedness, certain undischarged judgments, the occurrence of certain ERISA or bankruptcy or insolvency events, inability to pay debts or attachments or the occurrence of a change in control (as defined in the Spinco Term Loan) or a material provision of the Spinco Term Loan ceases to be in effect.

Prior to the closing date, only a bankruptcy or insolvency event of default with respect to Spinco would permit the lenders to terminate their commitments under the Spinco Term Loan.

The description of the Spinco Term Loan contained in this Item 1.01 does not purport to be complete and is qualified in its entirety by reference to the Spinco Term Loan, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.


Amendment No. 1 to the Term Loan Credit Agreement
. . .


ITEM 2.03 Creation of a Direct Financial Obligation or an Obligation Under an

Off-Balance Sheet Arrangement of a Registrant

To the extent required by Item 2.03 of Form 8-K, the information set forth in Item 1.01 above is incorporated herein by reference.

ITEM 9.01 Financial Statements and Exhibits.



(d) Exhibits



10.1      $10,000,000,000 Term Loan Credit Agreement, dated as of June 4, 2021,
        among Magallanes, Inc., the lenders named therein and JPMorgan Chase Bank,
        N.A., as agent.

10.2      Amendment No. 1, dated as of June 4, 2021, to the Term Loan Credit
        Agreement, dated as of January 29, 2021, among AT&T Inc., the lenders
        named therein and Bank of America, N.A., as agent.

10.3      Amendment No. 1, dated as of June 4, 2021, to the $7,500,000,000 Amended
        and Restated Credit Agreement, dated November 17, 2020, among AT&T,
        certain lenders named therein and Citibank, N.A., as agent.

10.4      Amendment No. 2, dated as of June 4, 2021, to the $7,500,000,000 Five
        Year Credit Agreement, dated December 11, 2018, among AT&T, certain
        lenders named therein and Citibank, N.A., as agent.

104     Cover Page Interactive Data File (embedded within the Inline XBRL
        document)

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© Edgar Online, source Glimpses

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