Starbucks Corporation Enters into A New $3.0 Billion Credit Agreement
September 17, 2021 at 05:16 pm EDT
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Starbucks Corporation entered into a new $3.0 billion Credit Agreement (the “Five-Year Credit Agreement”) by and among the Company, as borrower, and Bank of America, N.A., in its capacity as Administrative Agent, Lender, Swing Line Lender and L/C Issuer, Wells Fargo Bank, N.A., Citibank, N.A. and U.S. Bank National Association, as Lenders, Co-Syndication Agents and L/C Issuers, JPMorgan Chase Bank, N.A., The Bank of Nova Scotia and Morgan Stanley MUFG Loan Partners, LLC, as Co-Documentation Agents, BOFA Securities Inc., Wells Fargo Securities, LLC, Citibank, N.A., and U.S. Bank National Association, as Joint Lead Arrangers and Joint Book Runners, and each of the other lenders, which is a party thereto. The Five-Year Credit Agreement provides for a $3.0 billion unsecured, revolving credit facility (of which $150 million may be used for the issuances of letters of credit) and is scheduled to mature on September 16, 2026. Provided there is no default, the Company may request an increase from the lenders in the aggregate commitments by an amount not exceeding $1.0 billion, under certain circumstances as set forth in the Five-Year Credit Agreement. Borrowings under the Five-Year Credit Agreement will bear interest at a variable interest rate based on the London Interbank Offered Rate (“LIBOR”), and, for U.S. Dollar-denominated loans under certain circumstances, a Base Rate (as defined in the Five-Year Credit Agreement), in each case plus an applicable rate. The applicable rate is based on the Company’s long-term credit ratings assigned by Moody’s and Standard & Poor’s rating agencies. The Five-Year Credit Agreement contains provisions specifying alternative interest rate calculations to be employed at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on borrowings based on LIBOR. The “Base Rate” of interest is the high of the Federal Funds Rate plus 0.50%, Bank of America’s prime rate, and the Eurocurrency Rate (as defined in the Five-Year Credit Agreement) plus 1.00%. Upon the occurrence of any event of default under the Five-Year Credit Agreement, interest on the outstanding amount of the indebtedness under the Five-Year Credit Agreement will bear interest at a rate per annum equal to 2% in excess of the interest then borne by such borrowings. The Five-Year Credit Agreement contains provisions requiring the Company to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio of 2.50 to 1. The Five-Year Credit Agreement also contains certain customary events of default, including non-payment of principal, interest or fees, violation of covenants, cross default to certain other indebtedness, invalidity of any loan document, material judgments, bankruptcy and insolvency events, and change of control, subject, in certain instances, to cure periods. Upon the occurrence of an event of default, the lenders may elect to declare amounts outstanding under the Five-Year Credit Agreement immediately due and payable.
Starbucks Corporation specializes in owning and operating coffee shops. The group also develops a coffee roasting activity. Net sales break down by source of revenue as follows:
- sales within company-operated coffee shops (81.9%): as of October 1st, 2023, owned a network of 19,592 coffee shops under the Starbucks Coffee®, Teavana®, Ethos®, Starbucks Reserve® and Princi® brands;
- sales within licensed stores (12.5%): 18,446 licensed stores located primarily in the United States (6,701), Korea (1,870), Latin America (1,649) and the United Kingdom (911);
- other (5.6%): sales of coffee, beverages and food products for companies, hotels, hospitals, airlines, etc.
Net sales break down by family of products between beverages (60.3%), food (18.3%) and other (21.4%).
Net sales are distributed geographically as follows: the United States (73.4%), China (8.6%) and other (18%).