Business Context and Reporting Period
Company: The Mosaic Company
Filing Type: Form 8-K (Current Report)
Date of Report: November 18, 2016
Event: Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation.
Key Financial Metrics and Facility Details
The Company entered into a new unsecured revolving credit and term loan facility (the "Mosaic Credit Facility") with Wells Fargo Bank, National Association, as Administrative Agent.
- Revolving Credit Facility: Up to $2.0 billion (includes swing line loans up to $75 million and letters of credit up to $150 million).
- Term Loan Facility: $720 million (fully drawn on the effective date).
- Available Liquidity: Approximately $1.98 billion net available for borrowing as of the filing date (after accounting for ~$18.3 million in letters of credit).
- Unused Commitment Fee: 0.15% annually.
- Maturity Date: November 18, 2021.
- Amortization Schedule: 5.00% of Term Loan balance due on the first two anniversaries, 7.50% on the third, and 10.00% on the fourth.
Material Changes Versus Prior Period
The new facility amends and restates a prior credit facility (dated December 5, 2013) and replaces a prior term loan facility (dated March 20, 2014). Key changes include:
- Increased Capacity: Revolving credit facility increased from $1.5 billion to $2.0 billion.
- Debt Restructuring: Proceeds from the new $720 million Term Loan were used to prepay in full the prior term loans (aggregate $800 million outstanding, consisting of $370 million Term A-1 and $430 million Term A-2).
- Reduced Costs: Lowered rates applicable to unused commitment fees.
- Covenant Relief: Eliminated the requirement to maintain a Total Debt to EBITDA ratio of no more than 3.5 to 1.0.
- Flexibility: Provided additional flexibility under other restrictive covenants.
Guidance, Risks, and Covenants
Financial Covenants: The facility requires the Company to maintain:
- A ratio of Consolidated Indebtedness to Consolidated Capitalization of no greater than 0.65 to 1.0.
- A minimum Interest Coverage Ratio of not less than 3.5 to 1.0.
Other Covenants: Includes limitations on indebtedness, liens, investments, acquisitions (other than capital expenditures), mergers, and asset sales.
Cross-Default Provisions: A failure to pay principal or interest on other indebtedness exceeding $50 million (or $75 million for multiple items) or a breach permitting acceleration of other debt will trigger a cross-default.
Use of Proceeds: Working capital, capital expenditures, dividends, share repurchases, acquisitions, and other lawful corporate purposes.
Related Party Transactions: Lenders and affiliates may provide investment banking, underwriting, and derivative services to the Company for customary compensation.
Investor Verification Checklist
- Verify the full text of the Credit Agreement (Exhibit 10.1) for complete covenant definitions and interest rate mechanics.
- Confirm the Company's current compliance with the new Consolidated Indebtedness to Consolidated Capitalization (0.65:1.0) and Interest Coverage (3.5:1.0) ratios.
- Monitor the scheduled amortization payments of the $720 million Term Loan starting in 2017.
- Review the impact of the eliminated Debt-to-EBITDA covenant on future leverage capacity.