WESCO International Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by WESCO International, Inc. on June 12, 2020. The filing details the completion of a material definitive agreement involving the issuance of senior notes to finance the previously announced merger with Anixter International Inc.
Key Financial Metrics and Capital Structure
The company completed an offering of senior notes with the following terms:
- 5-Year Notes: $1,500 million aggregate principal amount, 7.125% interest rate, due June 15, 2025. Issued at 100.000% of principal.
- 8-Year Notes: $1,325 million aggregate principal amount, 7.250% interest rate, due June 15, 2028. Issued at 99.244% of principal.
- Total Principal: $2,825 million.
- Net Proceeds: Approximately $2,758.5 million after underwriting discounts and estimated offering expenses.
The notes are unsecured obligations of WESCO Distribution, Inc., guaranteed by WESCO International, Inc., and will be guaranteed by Anixter Inc. following the merger. The filing does not provide specific revenue, profit, or cash flow figures for the reporting period, as this document focuses on the debt issuance.
Material Changes and Use of Proceeds
The primary material change is the increase in long-term debt to fund the merger with Anixter. The net proceeds are designated for:
- Paying the cash portion of the merger consideration to Anixter stockholders.
- Refinancing existing Anixter indebtedness, including the 5.125% Senior Notes due 2021, and facilitating consent solicitations/tender offers for Anixter's 5.50% Senior Notes due 2023 and 6.00% Senior Notes due 2025.
- Refinancing other indebtedness of WESCO.
- Paying transaction fees, costs, and expenses.
Pro forma condensed combined financial information has been updated to reflect the offering and merger transactions, though actual results may differ significantly.
Outlook, Risks, and Covenants
Redemption and Repurchase Terms: The issuer may redeem notes prior to specific dates (June 15, 2022 for 5-Year; June 15, 2023 for 8-Year) with a "make-whole" premium. If the merger is not consummated by April 14, 2021, or if WESCO notifies the trustee it will not pursue the merger, the issuer must redeem the notes at 100% of the issue price plus accrued interest.
Covenants: The indenture limits the ability to pay dividends, repurchase stock, incur liens, engage in sale-leaseback transactions, or sell assets. These covenants may terminate if the notes receive investment-grade credit ratings.
Risks and Contingencies: Management highlights risks related to the COVID-19 pandemic, regulatory approvals for the merger, integration challenges, potential failure to achieve synergies, and higher-than-anticipated leverage. Forward-looking statements are subject to uncertainties that could cause actual results to differ materially.
Investor Verification Checklist
- Verify the final closing date and status of the merger with Anixter International Inc.
- Review the Unaudited Pro Forma Condensed Combined Financial Information (Exhibit 99.1) for projected leverage and interest coverage ratios.
- Monitor the status of regulatory approvals required for the merger.
- Assess the impact of the new debt service obligations (7.125% and 7.250% interest rates) on future cash flows.
- Check for any updates regarding the consent solicitations or tender offers for Anixter's existing debt.