Summary
Seagate Technology Holdings plc (STX) announced an eighth amendment to its Credit Agreement, primarily focused on modifying its debt covenants. The amendment introduces a 'covenant relief period' running until June 27, 2025, during which specific leverage and interest coverage ratios are adjusted. Notably, the total leverage ratio is temporarily replaced by a total net leverage ratio, with a maximum of 6.75x initially, and the minimum interest coverage ratio is reduced to 2.50x. This amendment also includes significant changes to the company's credit facilities, reducing revolving loan commitments by $250.0 million to $1.5 billion. Furthermore, Seagate faces potential increases in interest rates on its loans if it does not prepay at least $450.0 million in term loans by September 30, 2023. A failure to meet this prepayment target or a downgrade in corporate ratings could also trigger an obligation to provide collateral for the Credit Agreement, subject to certain conditions.
Key Highlights
- 1Seagate entered into an eighth amendment to its Credit Agreement on May 19, 2023.
- 2A 'covenant relief period' is established from the amendment date until June 27, 2025, with modified financial covenants.
- 3The total leverage ratio is temporarily replaced by a total net leverage ratio (max 6.75x) during the relief period.
- 4Minimum interest coverage ratio is reduced to 2.50x during the relief period.
- 5Revolving loan commitments are reduced by $250.0 million, totaling $1.5 billion.
- 6Failure to prepay $450.0 million in term loans by September 30, 2023, may lead to increased interest rates.
- 7An obligation to provide collateral may arise if certain loan prepayment or corporate rating thresholds are not met.