8-KMaterial AgreementsFinancial EventsOther Events+1

ALTRIA GROUP, INC. 8-K Report, Material Agreement (Dec 22, 2008)

Filed December 22, 2008For Securities:MO

Summary

Altria Group, Inc. (MO) filed an 8-K on December 22, 2008, detailing significant financing activities related to its acquisition of UST, Inc. The company entered into a $5.08 billion 364-day bridge loan facility, guaranteed by Philip Morris USA Inc. (PM USA), which is intended to be refinanced through capital markets transactions. This bridge loan agreement includes financial covenants requiring specific debt-to-EBITDA and EBITDA-to-interest expense ratios. In conjunction with this, Altria also announced an amendment to its 5-year revolving credit agreement, increasing the maximum debt-to-EBITDA ratio to 3.0 to 1 from 2.5 to 1. Furthermore, on December 22, 2008, Altria successfully issued $775 million of 7.125% Notes due 2010, also guaranteed by PM USA. The net proceeds from this note issuance are earmarked to reduce borrowings or commitments under the aforementioned bridge loan, demonstrating a strategic move to secure funding for the UST acquisition while simultaneously working to replace short-term debt with longer-term capital markets financing.

Key Highlights

  • 1Entered into a $5.08 billion 364-day bridge loan agreement to finance the acquisition of UST, Inc., with JPMorgan Chase Bank, N.A. and Goldman Sachs Credit Partners L.P. as administrative agents.
  • 2Philip Morris USA Inc. (PM USA) provided a guarantee for Altria's obligations under the 364-day bridge loan agreement.
  • 3The bridge loan agreement contains financial covenants, including a maximum consolidated debt to consolidated EBITDA ratio of 3.0 to 1 and a minimum consolidated EBITDA to consolidated interest expense ratio of 4.0 to 1.
  • 4Amended the 5-year revolving credit agreement to increase the maximum consolidated debt to consolidated EBITDA ratio from 2.5 to 1 to 3.0 to 1.
  • 5Issued $775 million aggregate principal amount of 7.125% Notes due 2010 on December 22, 2008.
  • 6The 7.125% Notes due 2010 are senior unsecured obligations of Altria and are guaranteed by PM USA.
  • 7Net proceeds from the 7.125% Notes issuance will be used to reduce borrowings or commitments under the 364-day bridge loan facility.

Frequently Asked Questions

The primary purpose of the 364-day bridge loan agreement is to provide interim financing for Altria's acquisition of UST, Inc. It is designed to be a short-term funding source that Altria intends to replace with proceeds from capital markets financing transactions.

The net proceeds generated from the issuance of the 7.125% Notes due 2010 will be used to reduce borrowings or commitments under the 364-day bridge loan agreement. This demonstrates Altria's strategy to transition from short-term bridge financing to longer-term debt.

For the 364-day bridge loan, Altria must maintain a consolidated debt to consolidated EBITDA ratio of not more than 3.0 to 1 and a consolidated EBITDA to consolidated interest expense ratio of not less than 4.0 to 1. The amendment to the 5-year revolving credit agreement also increased the maximum debt to EBITDA ratio to 3.0 to 1.

The 7.125% Notes due 2010 are senior unsecured obligations of Altria. The bridge loan agreement also refers to Altria's long-term senior unsecured debt rating for interest rate determination, indicating it is also unsecured, with the exception of the guarantee provided by PM USA.