Business Context and Reporting Period
Company: Molson Coors Brewing Company
Filing Type: Form 8-K (Current Report)
Date of Report: June 15, 2012
Reporting Period: Events occurring on June 14 and June 15, 2012.
This filing details the completion of the acquisition of Starbev Holdings S.à r.l. (Starbev) and the associated financing arrangements, including the issuance of a convertible note and borrowings under term loan and revolving credit facilities.
Key Financial Metrics and Transactions
- Acquisition Price: Approximately €2.65 billion (including payoff of existing Starbev indebtedness).
- Convertible Note Issuance: €500,000,000 Zero Coupon Senior Unsecured Convertible Bond due 2013 issued to Starbev L.P.
- Term Loan Borrowings:
- Company borrowed $150,000,000.
- Additional Borrower (Molson Coors European Finance Company) borrowed approximately €119,712,689.
- Revolving Credit Facility: 2012 facility amended to increase borrowing limit to $550,000,000. No borrowings were outstanding under this facility as of the filing date.
- Guarantees: The Company guaranteed the obligations of the purchaser (MC Netherlands) and joined as a guarantor for various credit agreements.
Material Changes and Agreements
Completion of Acquisition (Item 2.01): Molson Coors Netherlands B.V. completed the acquisition of all share capital of Starbev Holdings S.à r.l. from Starbev L.P. The purchase agreement was amended on June 14, 2012, to transfer rights and obligations from Molson Coors Holdco 2 LLC to MC Netherlands.
Convertible Note Terms (Item 1.01): The €500 million note matures on December 31, 2013. It allows the seller to put the note for the greater of the principal amount or the cash value of 12,894,044 shares of Class B Common Stock. The issuer may redeem the note if the market value of the notional shares exceeds 140% of the principal amount. Settlement in excess of principal may be made in shares at the issuer's option.
Debt Structure Updates (Item 2.03): The Company designated Molson Coors European Finance Company as an additional borrower under the Term Loan Agreement. The Issuer joined the Term Loan Subsidiary Guarantee Agreement and the Credit Agreement Subsidiary Guarantee Agreement. The 2012 Revolving Credit Facility became effective with a $550 million limit.
Guidance, Risks, and Contingencies
- Financial Statements: Financial statements of the acquired business and pro forma financial information are not included in this filing. They are expected to be filed by amendment within 71 days.
- Cross Default and Acceleration: The Convertible Note contains cross acceleration and cross default provisions triggered by defaults on other indebtedness exceeding $50,000,000.
- Registration Rights: A Registration Rights Agreement was entered into, requiring the Company to file a registration statement within 30 days if the Convertible Note is settled in shares. The Company is not required to participate in more than two underwritten offerings.
- Principal Reduction: The Convertible Note principal may be reduced in case of certain claims by the Company against the Seller.
Investor Verification Checklist
- Verify the final purchase price of €2.65 billion and the specific breakdown of cash versus debt financing.
- Review the attached Convertible Note (Exhibit 10.1) for detailed conversion formulas and adjustment mechanisms for corporate events.
- Monitor the upcoming filing (within 71 days) for pro forma financial information to assess the impact of the Starbev acquisition on consolidated earnings and leverage.
- Confirm the status of the €119.7 million and $150 million term loan borrowings and their impact on the Company's debt covenants.
- Check for any future amendments to the Credit Agreement regarding the utilization of the $550 million revolving facility.