Business Context and Reporting Period
This Form 8-K Current Report is filed by Molson Coors Brewing Company for the reporting period of May 3, 2012. The filing details the completion of a significant debt offering and the termination of a temporary bridge loan facility. The primary business context involves financing the acquisition of Starbev Holdings S.à r.l. (the "Acquisition").
Key Financial Metrics and Capital Structure
The Company completed an offering of senior notes with an aggregate principal amount of $1,900,000,000. The net proceeds from the offering were approximately $1.88 billion before expenses. The debt issuance consists of three tranches:
- 2017 Notes: $300,000,000 principal at 2.000% interest, due May 1, 2017.
- 2022 Notes: $500,000,000 principal at 3.500% interest, due May 1, 2022.
- 2042 Notes: $1,100,000,000 principal at 5.000% interest, due May 1, 2042.
Interest is payable semi-annually in cash in arrears, commencing November 1, 2012. The Notes are unsecured, unsubordinated obligations guaranteed jointly and severally by various wholly-owned subsidiaries. The filing does not provide specific revenue, profit, or operating cash flow metrics for the period, as this is a transactional filing rather than an earnings report.
Material Changes Versus Prior Period
Termination of Bridge Loan: On May 3, 2012, the Company terminated a 364-Day Bridge Loan Agreement entered into on April 3, 2012, which provided a facility of $1,900,000,000. No amounts were borrowed under this facility, and no payments are due as a result of the termination. The associated Subsidiary Guarantee Agreement was also terminated.
Debt Issuance: The Company replaced the bridge facility with permanent long-term debt (the Notes described above). This represents a material change in the Company's capital structure, adding $1.9 billion in long-term senior debt.
Guarantor Expansion: As of May 3, 2012, three additional subsidiaries (MCBC UK, Holdings Limited, and Golden) were added as guarantors to existing credit agreements and note series.
Guidance, Outlook, and Risks
Use of Proceeds: The Company intends to use all net proceeds as partial consideration for the Acquisition of Starbev Holdings S.à r.l. Prior to the closing of the Acquisition, proceeds will be invested in short-term interest-bearing instruments (e.g., U.S. government securities, money market funds).
Redemption Provisions and Risks:
- Mandatory Redemption: If the Acquisition is not completed by November 2, 2012, or if the Sale and Purchase Agreement is terminated prior to that date, the Company is obligated to redeem all Notes at 101% of the principal amount plus accrued interest.
- Change of Control: Upon a change of control triggering event, the Company must offer to purchase the Notes at 101% of the principal amount plus accrued interest.
- Covenants: The Indenture limits the Company's ability to incur additional secured indebtedness, enter into certain sale and leaseback transactions, and merge or sell substantially all assets.
Events of Default: Standard events of default include nonpayment, breach of covenants, and bankruptcy. If an event of default occurs, holders of at least 25% of the principal amount may declare the debt due and payable.
Investor Verification Checklist
- Verify the closing status and timeline of the Starbev Holdings S.à r.l. Acquisition to assess the risk of mandatory redemption by November 2, 2012.
- Confirm the specific list of subsidiary guarantors and their financial health, as the Notes are guaranteed on a full and unconditional senior unsecured basis.
- Review the Indenture (Exhibit 4.1) for specific limitations on future secured indebtedness and asset sales.
- Monitor the investment of the $1.88 billion in net proceeds to ensure they remain in low-risk, short-term instruments pending the Acquisition.
- Check for any subsequent filings regarding the termination of the Sale and Purchase Agreement, which would trigger the 101% redemption price.