Item 1.01 Entry into a Material Definitive Agreement
On September 11, 2019 (the “Effective Date”), Centene Corporation, a Delaware corporation (“Centene”), amended and restated its existing credit agreement (the existing credit agreement, the “Existing Credit Agreement” and, as amended and restated, the “A&R Credit Agreement”) by and among Centene, Wells Fargo Bank, National Association, as administrative agent, and the lenders and other parties thereto. The Existing Credit Agreement was amended and restated to provide a new $1.45 billion U.S. dollar unsecured delayed-draw term loan facility (the “Term Loan Facility”) in addition to the existing $2.0 billion unsecured multi-currency revolving credit facility (the “Revolving Credit Facility”) already available to Centene under the Existing Credit Agreement; the Revolving Credit Facility shall remain in place under the A&R Credit Agreement. The commitments of the lenders to make loans under the Term Loan Facility will be available to Centene until the date that is 45 days after the Effective Date. Centene may make a single drawing under the Term Loan Facility, which drawing is subject to customary terms and conditions set forth in the A&R Credit Agreement. The proceeds of the Term Loan Facility will be used to fund the redemption of the Notes (as defined below) and pay fees and expenses in connection therewith with any remaining proceeds to be used for general corporate purposes.
At Centene’s option, borrowings under the Term Loan Facility will bear interest at LIBOR or base rates plus, in each case, an applicable margin. Applicable margins for LIBOR range from 90.0 to 200.0 basis points and applicable margins for base rate loans range from 0.0 to 100.0 basis points, in each case, determined based on Centene’s total debt-to-EBITDA ratio. Additionally, an upfront fee was payable on the Effective Date to each lender holding a commitment under the Term Loan Facility equal to 12.5 basis points on the Term Loan Facility commitments of such lenders. The Term Loan Facility will mature on September 11, 2022. Interest rates and the maturity in respect of the Revolving Facility will remain the same as under the Existing Credit Agreement.
The loans under the Term Loan Facility are subject to mandatory prepayment with (i) the net cash proceeds of certain debt incurred or issued by Centene and (ii) subject to customary reinvestment rights, the net cash proceeds of certain asset sales, insurance and condemnation events and other dispositions.
The A&R Credit Agreement contains financial covenants, including a minimum fixed charge coverage ratio and a maximum total debt-to-EBITDA ratio. The A&R Credit Agreement also contains customary covenants that restrict Centene and its subsidiaries in respect of, among other things, mergers and consolidations, sales of all or substantially all of its assets, the incurrence of debt and liens, change in the nature of its business, transactions with affiliates and the making of certain investments and restricted payments. The A&R Credit Agreement is subject to acceleration upon the occurrence of an event of default, which includes, among others things, cross-default with regard to indebtedness of Centene or its subsidiaries in excess of $300 million in the aggregate; cross-default with regard to Centene’s outstanding notes; the occurrence of a change of control (as defined in the A&R Credit Agreement); entry of judgment or order to pay of $300 million or more which is not stayed; the occurrence of certain bankruptcy events; failure to make payments under the A&R Credit Agreement when due; breach of representations and warranties or covenants under the A&R Credit Agreement; and invalidity of loan documents.