Item 1.01 Entry into a Material Definitive Agreement.
5.250% Senior Secured Notes due 2028
General
On the Closing Date, Merger Sub successfully completed the offering of
$850.0 million aggregate principal amount of 5.250% Senior Secured Notes due
2028 (the "Secured Notes"). The Secured Notes were offered and sold to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), and to persons outside of the United States in
compliance with Regulation S under the Securities Act. The Secured Notes have
not been registered under the Securities Act or any state securities laws and
may not be offered or sold in the United States absent an effective registration
statement or an applicable exemption from registration requirements or a
transaction not subject to the registration requirements of the Securities Act
or any state securities laws. The Secured Notes were issued pursuant to an
Indenture, dated as of the Closing Date, by and between Merger Sub and
Wilmington Trust, National Association, as trustee (as supplemented, the
"Secured Indenture").
On the Closing Date, upon the completion of the Merger, the Company and certain
subsidiaries of the Company (the "Subsidiary Guarantors") entered into a
supplemental indenture pursuant to which the Company assumed the obligations
under the Secured Notes and the Secured Indenture, and the Subsidiary Guarantors
guaranteed the Company's obligations under the Secured Notes and the Secured
Indenture.
The Company's obligations under the Secured Notes and the Secured Indenture are
fully and unconditionally guaranteed by each of the Company's direct or indirect
wholly owned material domestic subsidiaries that guarantees the Company's Term
Loan Facility (as defined below). The Secured Notes and the related guarantees
are secured by first-priority security interests in the "Term/Notes Priority
Collateral" (which consists of substantially all of the Company's and Subsidiary
Guarantors' assets other than the ABL Priority Collateral) and by
second-priority security interests in the "ABL Priority Collateral" (which
consists of the Company's and Subsidiary Guarantors' inventory and accounts
receivable and related assets), in each case subject to certain exceptions and
permitted liens set forth in the Secured Indenture and the security documents.
For more information regarding the collateral and arrangements with respect to
the collateral, see "Term Loan Facility-Collateral and Guarantors" below. The
Secured Notes are secured on a ratable basis with the Term Loan Facility with
respect to the Term/Notes Priority Collateral (on a first-priority basis) and
the ABL Priority Collateral (on a second-priority basis), in each case, on such
assets owned by the Company and the Subsidiary Guarantors.
Maturity and Interest Payments
The Secured Notes will mature on May 1, 2028. Interest on the Secured Notes
accrues at 5.250% per annum and will be paid semi-annually, in arrears, on May 1
and November 1 of each year, beginning November 1, 2021.
Redemption
On or after November 1, 2023, the Company may redeem the Secured Notes at its
option, in whole at any time or in part from time to time, at the redemption
prices set forth in the Secured Indenture. In addition, prior to November 1,
2023, the Company may redeem the Secured Notes at its option, in whole at any
time or in part from
--------------------------------------------------------------------------------
time to time, at a redemption price equal to 100% of the principal amount of the
Secured Notes redeemed, plus a "make-whole" premium and accrued and unpaid
interest, if any. Notwithstanding the foregoing, at any time and from time to
time prior to November 1, 2023, the Company may redeem in the aggregate up to
40% of the original aggregate principal amount of the Secured Notes (calculated
after giving effect to any issuance of additional notes) in an aggregate amount
not to exceed the amount of net cash proceeds of one or more equity offerings at
a redemption price equal to 105.250%, plus accrued and unpaid interest, if any,
so long as at least 50% of the original aggregate principal amount of the
Secured Notes (calculated after giving effect to any issuance of additional
notes) must remain outstanding after each such redemption. In addition, prior to
November 1, 2023, the Company may redeem during each twelve-month period up to
10% of the original aggregate principal amount of the Secured Notes (calculated
after giving effect to any issuance of additional notes) at a redemption price
equal to 103%, plus accrued and unpaid interest, if any.
Certain Covenants
The Secured Indenture, among other things, limits the Company's ability and the
ability of its restricted subsidiaries to, among other things: (i) incur or
guarantee additional indebtedness; (ii) pay dividends or distributions on, or
redeem or repurchase, capital stock and make other restricted payments;
(iii) make investments; (iv) consummate certain asset sales; (v) engage in
certain transactions with affiliates; (vi) grant or assume certain liens; and
(vii) consolidate, merge or transfer all or substantially all of its assets.
These covenants are subject to a number of important qualifications and
exceptions. Additionally, upon the occurrence of specified change of control
events, the Company must offer to repurchase the Secured Notes at 101% of the
principal amount, plus accrued and unpaid interest, if any, to, but excluding,
the purchase date. The Secured Indenture also provides for customary events of
default.
7.875% Senior Notes due 2029
General
On the Closing Date, Merger Sub successfully completed the offering of
$1,300.0 million aggregate principal amount of 7.875% Senior Notes due 2029 (the
"Unsecured Notes"). The Unsecured Notes were offered and sold to qualified
institutional buyers pursuant to Rule 144A under the Securities Act and to
persons outside of the United States in compliance with Regulation S under the
Securities Act. The Unsecured Notes have not been registered under the
Securities Act or any state securities laws and may not be offered or sold in
the United States absent an effective registration statement or an applicable
exemption from registration requirements or a transaction not subject to the
registration requirements of the Securities Act or any state securities laws.
The Unsecured Notes were issued pursuant to an Indenture, dated as of the
Closing Date, by and between Merger Sub and Wilmington Trust, National
Association, as trustee (as supplemented, the "Unsecured Indenture").
On the Closing Date, upon the completion of the Merger, the Company and the
Subsidiary Guarantors entered into a supplemental indenture pursuant to which
the Company assumed the obligations under the Unsecured Notes and the Unsecured
Indenture and the Subsidiary Guarantors guaranteed the Company's obligations
under the Unsecured Notes and the Unsecured Indenture.
The Company's obligations under the Unsecured Notes and the Unsecured Indenture
are fully and unconditionally guaranteed by the Subsidiary Guarantors.
Maturity and Interest Payments
The Unsecured Notes will mature on May 1, 2029. Interest on the Unsecured Notes
accrues at 7.875% per annum and will be paid semi-annually, in arrears, on May 1
and November 1 of each year, beginning November 1, 2021.
--------------------------------------------------------------------------------
Redemption
On or after May 1, 2024, the Company may redeem the Unsecured Notes at its
option, in whole at any time or in part from time to time, at the redemption
prices set forth in the Unsecured Indenture. In addition, prior to May 1, 2024,
the Company may redeem the Unsecured Notes at its option, in whole at any time
or in part from time to time, at a redemption price equal to 100% of the
principal amount of the Unsecured Notes redeemed, plus a "make-whole" premium
and accrued and unpaid interest, if any. Notwithstanding the foregoing, at any
time and from time to time prior to May 1, 2024, the Company may redeem in the
aggregate up to 40% of the original aggregate principal amount of the Unsecured
Notes (calculated after giving effect to any issuance of additional notes) in an
aggregate amount not to exceed the amount of net cash proceeds of one or more
equity offerings at a redemption price equal to 107.875%, plus accrued and
unpaid interest, if any, so long as at least 50% of the original aggregate
principal amount of the Unsecured Notes (calculated after giving effect to any
issuance of additional notes) must remain outstanding after each such
redemption.
Certain Covenants
The Unsecured Indenture, among other things, limits the Company's ability and
the ability of its restricted subsidiaries to, among other things: (i) incur or
guarantee additional indebtedness; (ii) pay dividends or distributions on, or
redeem or repurchase, capital stock and make other restricted payments;
(iii) make investments; (iv) consummate certain asset sales; (v) engage in
certain transactions with affiliates; (vi) grant or assume certain liens; and
(vii) consolidate, merge or transfer all or substantially all of its assets.
These covenants are subject to a number of important qualifications and
exceptions. Additionally, upon the occurrence of specified change of control
events, the Company must offer to repurchase the Unsecured Notes at 101% of the
principal amount, plus accrued and unpaid interest, if any, to, but excluding,
the purchase date. The Unsecured Indenture also provides for customary events of
default.
Term Loan Facility
General
On the Closing Date, upon the completion of the Merger, the Company assumed
Merger Sub's obligations under a Term Loan Credit Agreement, dated as of the
. . .
Item 1.02 Termination of a Material Definitive Agreement.
Termination of ABL Credit Agreement and Term Loan Credit Agreement
In connection with the consummation of the Merger, on the Closing Date, Michaels
Stores, Inc. ("MSI"), an indirect, wholly-owned subsidiary of the Company,
terminated (i) the Third Amended and Restated Credit Agreement, dated May 27,
2016 (as amended, supplemented or otherwise modified, including pursuant to the
First Amendment to Third Amended and Restated Credit Agreement, dated August 30,
2019, the "Existing ABL Credit Agreement"; the asset-based loan facility
provided pursuant to the ABL Credit Agreement, the "Existing ABL Credit
Facility"), by and among MSI and certain subsidiaries of MSI, as borrowers,
Michaels Funding, Inc., the direct parent company of MSI, and certain
subsidiaries of MSI, as facility guarantors, the lenders from time to time party
thereto and Wells Fargo Bank, National Association, as administrative agent and
collateral agent; and (ii) the Amended and Restated Credit Agreement, dated
January 28, 2013 (as amended, supplemented or otherwise modified, including
pursuant to the First Amendment to Amended and Restated Credit Agreement, dated
June 10, 2014, the Second Amendment to Amended and Restated Credit Agreement,
dated September 28, 2016, the Third
--------------------------------------------------------------------------------
Amendment to Amended and Restated Credit Agreement and Omnibus Amendment to Loan
Documents, dated May 23, 2018, and the Fourth Amendment to Amended and Restated
Credit Agreement, dated October 1, 2020, the "Existing Term Loan Credit
Agreement"; the term loan facility provided pursuant to the Term Loan Credit
Agreement, the "Existing Term Loan Credit Facility"), by and among MSI, as
borrower, the lenders from time to time party thereto and JPMorgan Chase Bank,
N.A., as administrative agent and collateral agent.
In connection with the termination of the Existing ABL Credit Facility, MSI
prepaid all of the outstanding obligations in respect of principal, interest and
fees under the Existing ABL Credit Facility. No prepayment premium or early
termination penalties were incurred by the Company or any of its subsidiaries in
connection with the termination of the Existing ABL Credit Facility. The
Existing ABL Credit Facility consisted of an aggregate principal amount of
$850.0 million of revolver commitments. On April 15, 2021, the outstanding
principal amount of loans pursuant to the Existing ABL Credit Facility was $0,
and the aggregate amount of outstanding letters of credit issued pursuant to the
Existing ABL Credit Facility was $87.4 million.
In connection with the termination of the Existing Term Loan Credit Facility,
MSI prepaid all of the obligations in respect of principal, interest and fees
under the Existing Term Loan Credit Facility. No prepayment premium or early
termination penalties were incurred by the Company or any of its subsidiaries in
connection with the termination of the Existing Term Loan Credit Facility. The
outstanding principal amount of the Existing Term Loan Credit Facility as of
April 15, 2021 was $1,661.7 million. In addition, in connection with the
termination of the Existing Term Loan Credit Facility, MSI terminated the
interest rate swaps and interest rate caps previously entered into to mitigate
interest rate risk in connection with the Existing Term Loan Credit Facility.
Certain lenders or agents under the Existing ABL Credit Facility or Existing
Term Loan Credit Facility (or their affiliates) have engaged in, or may in the
future engage in, transactions with, and perform services for, the Company and
its affiliates in the ordinary course of business or in connection with the
transactions contemplated by the Merger Agreement.
Redemption of MSI's 8.000% Senior Notes due 2027 and 4.750% Senior Secured Notes
due 2027
As previously disclosed, on April 1, 2021, MSI caused to be delivered to the
holders of MSI's 8.000% Senior Notes due 2027 (the "Existing Senior Notes") and
4.750% Senior Secured Notes due 2027 (the "Existing Secured Notes") notices of
conditional redemption (the "Notices of Redemption") relating to the redemption
in full of the Existing Senior Notes and the Existing Secured Notes on April 15,
2021 (the "Redemption Date"), subject to the consummation of the Merger.
Substantially concurrently with the closing of the Merger, on April 15, 2021,
MSI irrevocably deposited with the respective trustees of the Existing Senior
Notes and the Existing Secured Notes sufficient funds to fund the redemption of
the Existing Senior Notes and the Existing Secured Notes, respectively. The
Existing Senior Notes were redeemed at a redemption price of 113.191% of the
principal amount thereof and the Existing Secured Notes were redeemed at a
redemption price of 112.054% of the principal amount thereof, in each case, plus
accrued and unpaid interest thereon to, but excluding, the Redemption Date, in
accordance with the terms of (i) the Indenture, dated as of July 8, 2019, by and
among MSI, the guarantors party thereto and U.S. Bank National Association, as
trustee, relating to the Existing Senior Notes, and (ii) the Indenture, dated as
of October 1, 2020, by and among MSI, the guarantors party thereto and U.S. Bank
National Association, as trustee and collateral agent, relating to the Existing
Secured Notes.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 2.03.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses