8-KMaterial AgreementsFinancial EventsRegulation FD+1

WESTERN DIGITAL CORP 8-K Report, Material Agreement (Sep 22, 2016)

Filed September 22, 2016For Securities:WDC

Summary

Western Digital Corporation (WDC) has filed an 8-K report on September 22, 2016, detailing an amendment to its existing Loan Agreement. The primary focus of this amendment, designated as Amendment No. 2, is the refinancing of outstanding Euro-denominated term B loans. This strategic move involves replacing the existing Euro Term B Loans with new Euro Term B-1 Loans totaling €885 million. A key benefit for investors is the significant reduction in the interest rate margin on these loans, decreasing from 5.25% to 3.25% for Euribor borrowings and from 4.25% to 2.25% for base rate borrowings, while the Euribor floor remains unchanged at 0.75%. This refinancing aims to improve the company's cost of debt, potentially leading to enhanced profitability and financial flexibility. The new Euro Term B-1 Loans maintain similar repayment structures and collateralization as the previous loans, with a maturity of seven years from the original loan agreement date. The report also includes a press release dated September 22, 2016, for additional context, although it is furnished and not filed. Investors should note the 1.00% prepayment premium applicable to repricing transactions within six months of closing.

Key Highlights

  • 1WDC entered into Amendment No. 2 to its Loan Agreement on September 22, 2016.
  • 2The amendment refinances outstanding Euro-denominated term B loans with new Euro Term B-1 Loans amounting to €885 million.
  • 3Significant reduction in interest rate margins: from 5.25% to 3.25% (for Euribor borrowings) and from 4.25% to 2.25% (for base rate borrowings).
  • 4Euribor floor remains unchanged at 0.75% for Euribor borrowings.
  • 5The new loans amortize quarterly at 0.25% of the original principal amount, with the balance due in seven years.
  • 6The Euro Term B-1 Loans are guaranteed and secured by the same collateral as other loans under the agreement.
  • 7A 1.00% prepayment premium applies to repricing transactions within six months of the closing date of the Euro Term B-1 Loans.

Frequently Asked Questions

The primary purpose of Amendment No. 2 is to replace existing Euro-denominated term B loans with new Euro Term B-1 Loans totaling €885 million. This refinancing includes a significant reduction in the applicable interest rate margins, which is expected to lower the company's borrowing costs.

The amendment significantly reduces interest rate margins. For Euribor borrowings, the margin drops from 5.25% to 3.25%, and for base rate borrowings, it decreases from 4.25% to 2.25%. This reduction should lead to lower interest expenses for Western Digital, potentially improving net income.

The Euro Term B-1 Loans will amortize in equal quarterly installments of 0.25% of the original principal amount. The remaining balance will be due seven years after the original Loan Agreement date, which was April 29, 2016.

Yes, the amendment specifies a 1.00% prepayment premium if a repricing transaction occurs with respect to the Euro Term B-1 Loans within six months of the closing date. This is a common feature in debt agreements to compensate lenders for early repayment or refinancing.