8-KMaterial AgreementsFinancial EventsExhibits & Filings

APPLIED MATERIALS INC /DE 8-K Report, Material Agreement (Aug 21, 2019)

Filed August 21, 2019For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) has filed an 8-K report detailing significant financing arrangements related to its previously announced acquisition of Kokusai Electric Corporation. On August 19, 2019, the company entered into a $2.0 billion unsecured Term Loan Credit Agreement to fund a portion of the $2.2 billion acquisition consideration, transaction expenses, and general corporate purposes. The Term Loan carries interest rates based on either Adjusted LIBOR or a Base Rate, plus an applicable margin that varies with AMAT's credit ratings. Additionally, AMAT amended its existing Revolving Credit Agreement. The key change is the replacement of a previous financial covenant with the same debt-to-EBITDA ratio (initially 3.50x, with a potential temporary increase to 4.00x following material acquisitions) stipulated in the new Term Loan Agreement. This move aligns the financial covenants across its major credit facilities, providing a more consistent financial management framework as the company integrates the Kokusai Electric acquisition.

Key Highlights

  • 1Secured a $2.0 billion unsecured Term Loan Agreement to partially fund the $2.2 billion acquisition of Kokusai Electric Corporation.
  • 2The Term Loan proceeds will also cover transaction fees and general corporate purposes.
  • 3Interest rates on the Term Loan will be based on Adjusted LIBOR or a Base Rate, plus a margin dependent on AMAT's credit ratings.
  • 4A Ticking Fee will be applied to unfunded Term Loan commitments.
  • 5Amended Revolving Credit Agreement to align financial covenants with the new Term Loan Agreement.
  • 6New financial covenant requires a consolidated funded debt to consolidated adjusted EBITDA ratio not to exceed 3.50x (or 4.00x post-acquisition).
  • 7The acquisition closing is subject to regulatory approvals and has a target date of June 30, 2020, with potential extensions.

Frequently Asked Questions

Applied Materials is financing the $2.2 billion acquisition of Kokusai Electric through a combination of cash on hand and a newly secured $2.0 billion unsecured Term Loan Credit Agreement. The Term Loan will cover a substantial portion of the cash consideration, along with transaction expenses and general corporate needs.

The Term Loan is unsecured and has a maturity date of three years from the funding date. Interest rates can be based on Adjusted LIBOR or a Base Rate, plus an applicable margin that ranges from 0.0% to 1.125% depending on AMAT's credit ratings. The company will also pay a Ticking Fee on any unfunded commitments.

Applied Materials amended its Revolving Credit Agreement to match the financial covenant in the new Term Loan Agreement. The company must now maintain a ratio of consolidated funded debt to consolidated adjusted EBITDA of not greater than 3.50 to 1.00. This ratio can temporarily increase to 4.00 to 1.00 following certain material acquisitions, such as the Kokusai Electric purchase.

The acquisition is expected to close by June 30, 2020, subject to regulatory approvals. There are provisions for two separate three-month extensions if regulatory approvals are the only remaining conditions to closing.