8-KMaterial AgreementsFinancial EventsExhibits & Filings

WESTERN DIGITAL CORP 8-K Report, Material Agreement (Apr 29, 2016)

Filed April 29, 2016For Securities:WDC

Summary

Western Digital Corporation (WDC) filed an 8-K on April 29, 2016, detailing the entry into a substantial Senior Credit Facilities agreement. This agreement provides approximately $9.875 billion in senior secured credit, encompassing multiple term loan tranches (Term Loan A, U.S. Term Loan B, Euro Term Loan B) and a revolving credit facility. The primary purpose of these new credit facilities is to partially finance the pending acquisition of SanDisk Corporation, refinance existing debt for both WDC and SanDisk, and cover associated transaction costs. A key aspect of this filing is the structure for the Term Loan B facilities, where proceeds were placed into segregated escrow accounts. These funds are contingent on the closing of the SanDisk acquisition and will be released upon satisfaction of certain conditions. If the acquisition does not close by a specified date or if conditions are not met, WDC is obligated to prepay these escrowed funds. The filing also outlines the interest rates, amortization schedules, fees, and covenants associated with these credit facilities, as well as the collateral securing the debt.

Key Highlights

  • 1WDC secured approximately $9.875 billion in new senior secured credit facilities, comprising Term Loan A, Term Loan B (USD and EUR), and a revolving credit facility.
  • 2The new credit facilities are primarily intended to finance the pending acquisition of SanDisk Corporation and refinance existing debt.
  • 3Proceeds from the Term Loan B facilities were placed into escrow and are conditional upon the successful closing of the SanDisk acquisition.
  • 4The credit agreement includes provisions for mandatory prepayments based on excess cash flow, asset sales, and debt issuance.
  • 5The facilities are secured by a lien on substantially all assets of WDC and certain subsidiaries upon satisfaction of acquisition-related conditions.
  • 6Interest rates and amortization schedules vary across the different loan tranches, with specific terms for LIBOR/EURIBOR and base rate borrowings.
  • 7The filing outlines various covenants, including limitations on additional debt, liens, acquisitions, and restricted payments, as well as mandatory financial ratio maintenance (fixed charge coverage and total leverage).

Frequently Asked Questions

The primary purpose of the approximately $9.875 billion Senior Credit Facilities is to partially finance Western Digital's pending acquisition of SanDisk Corporation. Additionally, the funds will be used to refinance certain existing indebtedness of both Western Digital and SanDisk, and to cover related transaction costs.

The proceeds from the U.S. and Euro Term Loan B facilities were deposited into separate segregated escrow accounts. These funds will be held in escrow and will only be released upon the closing of the SanDisk acquisition and the satisfaction of other specified conditions outlined in the Escrow Agreement and the Senior Credit Agreement. If the acquisition does not close by the specified date or if conditions cannot be met, Western Digital is obligated to prepay these amounts.

The facilities will bear interest at variable rates, with specific margins and floors depending on the loan type. Amortization schedules vary for the Term Loan A and Term Loan B facilities. The agreement also includes covenants that restrict Western Digital's ability to incur additional debt, place liens on assets, make acquisitions, or pay dividends, among other things. Furthermore, upon satisfaction of certain conditions related to the acquisition closing, WDC will be required to maintain minimum fixed charge coverage and maximum total leverage ratios, and face mandatory prepayments under certain circumstances.

Initially, the lenders under the Term Loan B facilities have a perfected first-priority lien on the funds held in the escrow accounts. Upon the satisfaction of the acquisition-related Escrow Release Conditions, Western Digital expects these Senior Credit Facilities to be secured on a first-priority basis by a lien on substantially all of Western Digital's and certain of its Guarantors' assets and properties, subject to certain customary exceptions and limitations.