BF-A

Business Context and Reporting Period

Company: Brown-Forman Corporation
Filing Type: Form 8-K (Current Report)
Report Date: November 21, 2011
Event Date: November 18, 2011
Context: The company entered into a new five-year credit agreement and terminated its previous credit facility dated April 30, 2007.

Key Financial Metrics

Debt Facility: $800,000,000 five-year unsecured credit commitment.
Maturity Date: November 18, 2016.
Interest Rates:

• LIBO/EURIBO: Adjusted rate plus a spread of 0.575% to 1.050%.
• Base Rate: Higher of (a) reference prime rate, (b) federal funds rate + 0.500%, or (c) adjusted LIBO + 1.000%.

Fees:

• Facility Fee: 0.050% to 0.200% of aggregate commitments (payable quarterly).
• Letter of Credit Fee: 0.575% to 1.050% of outstanding letters of credit (payable quarterly).

Covenants: Must maintain a consolidated EBITDA to consolidated interest expense ratio of not less than 3.0 to 1.0 for any four consecutive fiscal quarters.
Revenue/Profit/Cash Flow: The filing text does not provide a clear value for revenue, profit, cash flow, or margins.

Material Changes

Termination of Prior Agreement: The new agreement replaced the existing five-year credit agreement dated April 30, 2007.
Change in Lenders: The new syndicate includes Barclays Capital, Bank of America, N.A., Citibank, N.A., U.S. Bank National Association, Merrill Lynch, and Citigroup Global Markets, Inc., replacing the previous administrative and lending structure.

Outlook, Risks, and Management Commentary

Flexibility: Borrowings may be made in U.S. dollars, Euro, Sterling, or other freely transferable foreign currencies.
Prepayment: The company may prepay loans at any time, subject to break funding payments.
Risk Factors: Interest rates and fees are variable and dependent on the company's debt ratings by S&P and Moody's. Failure to maintain the 3.0 to 1.0 EBITDA/interest expense ratio would constitute a covenant breach.

Investor Verification Checklist

• Verify the current credit ratings assigned by S&P and Moody's to determine the applicable interest rate spread and facility fees.
• Confirm the company's current consolidated EBITDA and interest expense to ensure compliance with the 3.0 to 1.0 covenant ratio.
• Review the full text of the Five-Year Credit Agreement (Exhibit 10.1) for specific definitions of EBITDA and interest expense.
• Monitor the company's liquidity position to assess the need for drawing on the $800 million facility.