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WASTE MANAGEMENT INC 8-K Report, Material Agreement (Jun 29, 2018)

Filed June 29, 2018For Securities:WM

Summary

Waste Management, Inc. (WM) has announced a significant update to its financing structure through the Fourth Amended and Restated Credit Agreement, effective June 26, 2018. This agreement substantially increases the company's borrowing capacity and extends its maturity date, providing greater financial flexibility and support for its U.S. and Canadian operations. The increased credit facility is a strategic move to bolster the company's financial position, enabling it to manage working capital needs and pursue strategic initiatives more effectively. Key to this update is the expansion of the revolving credit facility from $2.25 billion to $2.75 billion, with an additional $750 million accordion feature. The maturity has been extended to June 26, 2023, with options for further extensions. The inclusion of Canadian subsidiaries as borrowers and the ability to borrow in Canadian dollars further enhances the company's international financial capabilities. The agreement also includes a financial covenant related to total debt to EBITDA, with a flexible leverage ratio that can be temporarily increased under specific acquisition scenarios, demonstrating WM's commitment to maintaining a strong balance sheet while allowing for growth opportunities.

Key Highlights

  • 1Increased total revolving credit commitment from $2.25 billion to $2.75 billion, with a $750 million accordion feature.
  • 2Extended the maturity date of the credit agreement to June 26, 2023, with options for two one-year extensions.
  • 3Added Canadian subsidiaries (Waste Management of Canada Corporation and WM Quebec Inc.) as borrowers, with the ability to borrow up to the U.S. dollar equivalent of $375 million in Canadian dollars.
  • 4Established interest rates and fees that are tiered based on the company's senior public debt rating, providing cost efficiencies for strong creditworthiness.
  • 5Maintained a financial covenant for maximum total debt to EBITDA ratio (Leverage Ratio) of 3.5:1, with a provision to temporarily increase to 4:1 for specific acquisitions.
  • 6As of closing, the company had no outstanding borrowings under the agreement, but $603 million in letters of credit were issued, leaving approximately $1.2 billion in unused credit capacity.

Frequently Asked Questions

The primary purpose is to extend the term and increase the aggregate available revolving credit to $2.75 billion (plus a $750 million accordion feature), enhancing Waste Management's financial flexibility and capacity to support its U.S. and Canadian operations.

The agreement extends the maturity date to June 26, 2023, and introduces specific covenants, including a maximum total debt to EBITDA ratio. It also allows for temporary increases in this ratio for significant acquisitions, providing strategic flexibility.

The inclusion of Canadian borrowers and the ability to borrow in Canadian dollars up to $375 million (U.S. dollar equivalent) allows Waste Management to better manage its financial needs and currency exposures in Canada.

As of the closing date of the agreement (June 27, 2018), Waste Management had no outstanding borrowings under the revolving credit facility but had $603 million in outstanding letters of credit, leaving approximately $1.2 billion in unused credit capacity.