Howmet Aerospace : New Financial Obligation - Form 8-K

Item 2.03.

Creation of a Direct Financial Obligation or an Obligation or an Off-Balance Sheet Arrangement of a Registrant.

On November 22, 2023, Howmet Aerospace Inc. ("Howmet Aerospace" or the "Company") entered into (i) a Term Loan Agreement (the "USD Term Loan Agreement") by and among the Company, a syndicate of lenders named therein, and Truist Bank, as administrative agent for the lenders and syndication agent, and (ii) a Term Loan Agreement (the "JPY Term Loan Agreement" and, together with the USD Term Loan Agreement, the "Term Loan Agreements" and each, individually, a "Term Loan Agreement") by and among the Company, a syndicate of lenders named therein, and Sumitomo Mitsui Banking Corporation, as administrative agent for the lenders.

The USD Term Loan Agreement provides a $200 million senior unsecured delayed draw term loan facility (the "USD Credit Facility") that matures on November 22, 2026, unless earlier terminated in accordance with the provisions of the USD Term Loan Agreement. The JPY Term Loan Agreement provides a ¥33 billion senior unsecured delayed draw term loan facility (the "JPY Credit Facility" and, together with the USD Credit Facility, the "Credit Facilities") that matures on November 22, 2026, unless earlier terminated in accordance with the provisions of the JPY Term Loan Agreement.

Each of the Credit Facilities is unsecured and amounts payable thereunder will rank pari passu with all other unsecured, unsubordinated indebtedness of the Company. Borrowings under the USD Credit Facility will be denominated in U.S. dollars, and borrowings under the JPY Credit Facility will be denominated in Japanese yen. Loans under each of the Credit Facilities may be prepaid without premium or penalty.

Under the USD Credit Facility, loans will bear interest at a base rate or a rate equal to Term SOFR plus adjustment, plus, in each case, an applicable margin based on the credit ratings of the Company's outstanding senior unsecured long-term debt. Based on the Company's current long-term debt ratings, the applicable margin on base rate loans would be 0.750% per annum and the applicable margin on Term SOFR loans would be 1.750% per annum. Loans under the USD Credit Facility amortize 2.5% in the second year and 5.0% in the third year.

Under the JPY Credit Facility, loans will bear interest at a rate equal to the Cumulative Compounded RFR Rate utilizing the Tokyo Overnight Average Rate plus an applicable margin based on the credit ratings of the Company's outstanding senior unsecured long-term debt. Based on the Company's current long-term debt ratings, the applicable margin on loans under the JPY Credit Facility would be 1.750% per annum.

The obligations of the Company to pay amounts outstanding under the respective Credit Facilities may be accelerated upon the occurrence of an "Event of Default" as defined therein. Such Events of Default include, among others, (a) non-payment of obligations; (b) breach of any representation or warranty in any material respect; (c) non-performance of covenants and obligations; (d) with respect to other indebtedness in a principal amount in excess of $100 million, a default thereunder that causes such indebtedness to become due prior to its stated maturity or a default in the payment at maturity of any principal of such indebtedness; (e) the bankruptcy or insolvency of the Company; and (f) a change in control of the Company.

The Term Loan Agreements contain respective covenants, including, among others, (a) limitations on the Company's ability to incur liens securing indebtedness for borrowed money; (b) limitations on the Company's ability to consummate a consolidation, merger, or sale of all or substantially all of its assets; (c) limitations on the Company's ability to change the nature of its business; and (d) a limitation requiring the ratio of Consolidated Net Debt to Consolidated EBITDA as of the end of each fiscal quarter for the period of the four fiscal quarters most recently ended, to be less than or equal to 3.75 to 1.00.

Capitalized terms used in this Item 2.03 and not otherwise defined herein shall have the same meaning as given in the respective Term Loan Agreement. The foregoing summary of the material terms of the respective Term Loan Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the respective Term Loan Agreements, copies of which will be filed with Howmet Aerospace's Annual Report on Form 10-K for the year ending December 31, 2023.