Business Context and Reporting Period
Company: Molson Coors Brewing Company
Filing Type: Form 8-K (Current Report)
Date of Report: April 3, 2012
Event: Entry into a Material Definitive Agreement to acquire Starbev Holdings S.à r.l. (Starbev).
Key Financial Metrics and Transaction Structure
This filing details the financing structure for the acquisition of Starbev rather than reporting standard operating financial results (revenue, profit, cash flow) for a specific period.
- Total Purchase Price: Approximately €2.65 billion (including payoff of existing Starbev indebtedness).
- Convertible Note: €500 million zero-coupon senior unsecured convertible note due December 31, 2013, issued to the seller (Starbev L.P.).
- Bridge Loan Facility: $1.9 billion 364-day bridge loan facility.
- Term Loan Facility: $300 million four-year term loan facility.
- Revolving Credit Facility: $300 million four-year revolving credit facility (with an uncommitted option to increase by $100 million).
Material Changes and Financing Terms
The Company has entered into multiple debt agreements to fund the Transaction. Key terms include:
- Interest Rates: Variable rates based on LIBOR or base rates plus an applicable margin ranging from 0.25% to 4.0% depending on the facility and the Company's debt rating.
- Commitment Fees: Range from 0.15% to 0.375% on undrawn commitments.
- Guarantees: The Company has guaranteed the obligations of its subsidiary (the Purchaser) and the obligations under the new loan facilities. Numerous subsidiaries have provided joint and several guarantees.
- Convertible Note Terms: The note allows the holder to put the note for the greater of the principal amount or the cash value of approximately 12.9 million shares of Class B Common Stock. The Issuer may redeem the note if the share value exceeds 140% of the principal.
Guidance, Risks, and Covenants
Conditions Precedent: The Transaction is conditioned upon receipt of European competition law approvals. The Purchaser may terminate the agreement if the Serbian Commission or European Commission issues a binding order prohibiting the Transaction.
Financial Covenants (Leverage Ratios): The new debt agreements require the Company to maintain specific maximum leverage ratios:
- April 3, 2012 – September 30, 2012: 4.00:1.00
- October 1, 2012 – March 31, 2013: 3.75:1.00
- Thereafter: 3.50:1.00
Other Covenants: Restrictions on incurring additional priority indebtedness, creating liens on assets, and engaging in mergers or consolidations.
Risks: The filing notes cross-acceleration and cross-default provisions. If the Company defaults on other indebtedness exceeding $50 million, it could trigger default on the Convertible Note. Additionally, the Convertible Note contains events of default consistent with the Company's outstanding notes.
Investor Verification Checklist
- Verify the status of European competition law approvals required to close the Transaction.
- Confirm the Company's current debt rating to determine the applicable interest rate margins on the new facilities.
- Monitor the Company's leverage ratio to ensure compliance with the 4.00:1.00 covenant through September 30, 2012.
- Review the Convertible Note Term Sheet (Exhibit 10.7) for specific conversion price adjustment provisions.
- Assess the impact of the €2.65 billion purchase price and associated debt on future liquidity and cash flow.