8-KMaterial AgreementsFinancial EventsExhibits & Filings

Hewlett Packard Enterprise Co 8-K Report, Material Agreement (Dec 22, 2016)

Filed December 22, 2016For Securities:HPEHPE-PC

Summary

Hewlett Packard Enterprise Company (HPE) announced on December 22, 2016, a significant financial arrangement related to the spin-off and merger of its Enterprise Services business (referred to as "Everett") with Computer Sciences Corporation (CSC). As part of these "Everett Transactions," a newly formed subsidiary, Everett SpinCo, Inc. ("Borrower"), has entered into a $2 billion senior unsecured delayed draw term loan facility. This facility is structured to fund various expenses associated with the transaction, including a special dividend back to HPE. The loan comprises multiple tranches, totaling approximately $2 billion, with commitments available until mid-2017. Borrowings can be made under either an Alternate Base Rate (ABR) or LIBOR-based interest rate, with varying margin spreads depending on the tranche. The agreement includes standard covenants and events of default, with financial covenants focused on leverage and interest coverage ratios becoming applicable after the funding date, contingent on the completion of the CSC merger.

Key Highlights

  • 1HPE's subsidiary, Everett SpinCo, Inc., has secured a $2 billion senior unsecured delayed draw term loan facility.
  • 2The loan facility is a key component of the planned spin-off and merger of HPE's Enterprise Services business with Computer Sciences Corporation (CSC).
  • 3Proceeds from the term loan are intended for general corporate purposes, including transaction expenses and a special dividend to HPE.
  • 4The facility has multiple tranches: $375 million (Tranche A-1), $1.31 billion (Tranche A-2), and €315 million (Tranche A-3), totaling approximately $2 billion.
  • 5Commitments under the loan are available until August 1, 2017, with a potential extension to September 30, 2017.
  • 6Interest rates will be based on ABR or LIBOR, with specified margins that vary by tranche.
  • 7The agreement includes financial covenants related to EBITDA to interest expense and total debt to EBITDA ratios, which will become effective post-funding.

Frequently Asked Questions

The $2 billion term loan facility entered into by HPE's subsidiary, Everett SpinCo, Inc., is primarily to fund expenses related to the spin-off and merger of HPE's Enterprise Services business with Computer Sciences Corporation (CSC). It will also be used to pay a special dividend from the Borrower back to Hewlett Packard Enterprise Company as part of the transaction.

The funding date for the term loan is conditioned on the satisfaction or waiver of conditions required for the consummation of the merger between Everett SpinCo and CSC. Commitments under the loan are available until August 1, 2017, which can be extended to September 30, 2017, suggesting a potential funding period within this timeframe, dependent on the merger's closing.

Following the funding date, the loan agreement imposes two key financial covenants on the Borrower: (1) the ratio of consolidated EBITDA to consolidated interest expense must not be less than 3.0 to 1 for any four consecutive fiscal quarters, and (2) the ratio of consolidated total debt to consolidated EBITDA must not exceed 3.0 to 1 as of the end of any fiscal quarter.

The Term Loan Agreement includes standard events of default. If an event of default occurs, the lenders have the right to terminate their commitments and accelerate the maturity of the entire outstanding loan amount, in addition to pursuing other available rights and remedies.