8-KMaterial AgreementsFinancial EventsExhibits & Filings

Howmet Aerospace Inc. 8-K Report, Material Agreement (Mar 29, 2021)

Filed March 29, 2021For Securities:HWM

Summary

Howmet Aerospace Inc. (HWM) has filed an 8-K report detailing the fifth amendment to its Five-Year Revolving Credit Agreement, dated March 29, 2021. The primary focus of this amendment is to extend the 'Covenant Relief Period' through December 31, 2022. During this period, the company will operate under modified financial covenants, specifically a tiered approach to its Consolidated Net Debt to Consolidated EBITDA ratio, which is allowed to be higher than previously stipulated, ranging from 5.50:1.00 initially and gradually decreasing to 3.75:1.00 by the end of 2022. This amendment also introduces revised limitations on Liens and Subsidiary Indebtedness, and importantly, it prohibits Restricted Payments, including share repurchases and dividends, through the Covenant Relief Period. However, exceptions are made for permitted Restricted Payments if no loans are outstanding under the Credit Agreement, with specific annual limits provided for 2021 and 2022. Additionally, the definition of Consolidated Net Debt has been updated to permit netting of unrestricted cash and cash equivalents exceeding $300 million, offering some financial flexibility.

Key Highlights

  • 1Extension of the Covenant Relief Period for financial covenants until December 31, 2022.
  • 2Modified Consolidated Net Debt to Consolidated EBITDA ratio, with relaxed limits throughout the relief period.
  • 3Limitations on Liens to secure borrowed money not to exceed $100,000,000.
  • 4Restriction on Subsidiary Indebtedness, capped at $400,000,000 minus any outstanding Liens.
  • 5Prohibition of Restricted Payments (dividends, share repurchases) during the Covenant Relief Period, with exceptions for outstanding loan-free periods.
  • 6Amended definition of Consolidated Net Debt to include netting of unrestricted cash above $300,000,000.

Frequently Asked Questions

The main purpose of this 8-K filing is to report the fifth amendment to Howmet Aerospace's Five-Year Revolving Credit Agreement. This amendment extends a period of financial covenant relief through the end of 2022, allowing for higher debt-to-EBITDA ratios and imposing certain restrictions on other financial activities.

The amendment extends the 'Covenant Relief Period' and modifies the maximum permissible ratio of Consolidated Net Debt to Consolidated EBITDA. This ratio is allowed to be higher during the relief period, starting at 5.50:1.00 and gradually decreasing to 3.75:1.00 by the end of 2022. This provides the company with more flexibility in managing its debt levels relative to its earnings.

Yes, the amendment prohibits Restricted Payments, which include dividends and share repurchases, during the Covenant Relief Period. However, there is an exception: if no loans are outstanding under the credit agreement, the company may make Restricted Payments up to $250 million in 2021 and $400 million in 2022, plus any unused amounts from the prior year.

The definition of Consolidated Net Debt has been amended to allow the company to net unrestricted cash and cash equivalents against its indebtedness, provided that such unrestricted cash exceeds $300,000,000. This effectively reduces the reported net debt amount by amounts of excess cash available.