Item
1.01 Entry into a Material Definitive Agreement
On March
12, 2008, certain European subsidiaries of Milacron Inc. (
“Milacron”
) entered into a
five-year, asset-based revolving credit program (the
“
Credit Program
”
) pursuant to which up to €27
million (the
“Program
Limit”
) in aggregate financing will be made available to such
subsidiaries by Lloyds TSB Bank Plc (
“Lloyds Bank”
) and Lloyds TSB
Commercial Finance Limited (the
“Factor
”). The
Credit Program consists of two parts: (i) asset-based revolving loans (the
“Loan Facilities”
) provided by
Lloyds Bank to certain subsidiaries of Milacron organized in Germany, Holland
and Belgium and (ii) an accounts receivable factoring facility (the
“Factoring Facility”
) between
Milacron’s principal operating subsidiary in Germany (
“Ferromatik”
) and the
Factor. Based upon asset levels as of March 12, 2008, total borrowing
and factoring capacity under the Credit Program, when fully operational, is
expected to exceed €20 million but will likely be less than the full €27 million
limit. The Factoring Facility will replace an existing €10 million
factoring facility between Ferromatik and Heller Bank
Aktiengesellschaft. We anticipate that the incremental working
capital capacity provided by the new Credit Program will help us meet U.S.
pension funding obligations in 2008. Proceeds of the Credit Program
may be used solely for the working capital purposes of the Borrowers (as defined
below) and their affiliates.
Set forth
below is a summary of the terms and conditions of the Credit Program. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the transaction agreements governing
the Credit Program. Copies of the principal agreements are furnished
as Exhibits 10.1 through 10.6 hereto, and a press release regarding the Credit
Program is furnished as Exhibit 99.1 hereto.
Borrowers
and Guarantors; Security
Cimcool
Europe B.V. and Cimcool Industrial Products B.V., Dutch subsidiaries of
Milacron, D-M-E Europe CVBA, a Belgian subsidiary of Milacron, and Ferromatik
are the borrowers (the
“Borrowers”
) under the Loan
Facilities. Each Borrower is a guarantor of each other Borrower’s
obligations. In addition, Milacron B.V. and Milacron Netherlands
B.V., Dutch subsidiaries of Milacron, and Milacron Kunststoffmaschinen Europa
GmbH, a German subsidiary of Milacron, are guarantors (the
“Guarantors”
) of the Loan
Facilities. Ferromatik is the seller of accounts receivable under the
Factoring Facility.
Borrowings
under the Loan Facilities are secured by the accounts receivable (other than
accounts receivable of Ferromatik, which are sold pursuant to the Factoring
Facility) and certain bank accounts and inventory of the Borrowers, by a land
charge on certain real property owned by Ferromatik and by pledges of shares in
each of the Borrowers by their respective parent entities.
Commitments
and Maturity
Amounts
advanced under the Loan Facilities and the Factoring Facility count together
toward the overall Program Limit of €27 million in aggregate financing at any
one time outstanding. The Loan Facilities will mature, and the
Factoring Facility will terminate, five years after the commencement date of
March 12, 2008. The Borrowers may request letters of credit or
guarantees from Lloyds Bank, the amounts of which will be reserved against
availability.
The Loan
Facility provided to Ferromatik is subject to a sub-limit equal to €11,160,000
on March 12, 2008, which reduces thereafter in equal quarterly amounts of
€279,000. The other Loan Facilities and the Factoring Facility are
collectively subject to a sub-limit equal at any time to the overall Program
Limit of €27 million less the amount of the sub-limit for the Loan Facility to
Ferromatik in effect at such time.
Borrowing
Availability
The
amount of loans available at any time under each Loan Facility (other than
the Loan Facility provided to Ferromatik) is limited to a specified percentage
of the value of the eligible accounts receivable of the Borrower under that Loan
Facility that are then outstanding. The availability of loans under
each Loan Facility (including the Loan Facility provided to Ferromatik) is
further subject to reserves against availability established by Lloyds Bank in
its discretion. A permanent block of €2 million applies against total
availability under the Credit Program. In addition, aggregate
borrowing under the Credit Program may not exceed 150% of the combined gross
receivables ledger balances of the Borrowers at any time.
Prepayments
and Early Termination
The
Borrowers may prepay the Loan Facilities, in whole or in part, at any time
without penalty. However, if the Credit Program is terminated for any
reason (except in limited specified circumstances pertaining to change in laws)
prior to March 12, 2010, the Borrowers must pay a fee of 1.0% of the Program
Limit, and if the Borrowers terminate the Credit Program early at any time
thereafter, they must pay a fee of $200,000 unless they give 3 months notice of
their intent to terminate the Credit Program.
Warranties;
Covenants
The Loan
Facilities contain warranties customary for this type of
financing. Under the Factoring Facility, Ferromatik makes customary
warranties regarding the accounts receivable sold by it to the
Factor.
The Loan
Facilities contain customary affirmative and negative covenants. In
addition, Milacron B.V. and its subsidiaries must maintain a minimum fixed
charge coverage ratio, tested quarterly with a six-month look-back period, and
Ferromatik must maintain a minimum tangible net worth. The Borrowers
and the Guarantors are permitted to transfer up to $25 million of the funds
initially made available under the Credit Program to their U.S. affiliates,
provided that no termination event has occurred. Any further transfer
of any funds to U.S. affiliates, regardless of source, is permitted only if, pro
forma for such transfer, a headroom of €7 million (including the permanent
headroom block) would be maintained under the Credit Program based on six-month
projections for cashflow of Milacron B.V. and its
subsidiaries.
Termination
Events
The Loan
Facilities contain customary termination events, which are subject in certain
cases to customary grace periods and materiality standards, including, among
others, termination events upon the occurrence of (i) breach of warranty or
covenant (other than in respect of debt turn or dilution rates) under the Credit
Program, (ii) failure to pay any amount when due under the Credit Program or, in
the case of Ferromatik, a related swap agreement with Lloyds Bank, (iii) breach
of any other financing facility, (iv) insolvency of any Borrower or
Guarantor, moratorium or the taking of steps in the direction of insolvency, (v)
sale of all or a substantial portion of the Borrowers’ businesses or assets or
ceasing to conduct the business conducted by them on the commencement date, (vi)
material change in the composition of any Borrower’s (other than Ferromatik’s)
board of directors or senior management or a change in ownership of 10 percent
or more of any Borrower’s (other than Ferromatik’s) shares (other than such
change that results in a transfer of shares to an affiliate) or in its
constitution or composition, (vii) there is a deterioration in the overall
financial condition or operating performance or overall management and control
or in the sales ledger administration or credit control procedures of any
Borrower (and, solely in the case of Ferromatik, such change results in a
material adverse effect), (viii) Ferromatik suffers a material adverse effect,
(ix) any person who has waived or released rights in the accounts receivable of
the Borrowers (other than Ferromatik) withdraws or attempts to withdraw such
waiver or release or otherwise asserts any interest in the accounts receivable,
(x) any Borrower (other than Ferromatik) attempts to reject any variation
proposed by Lloyds Bank to the operating conditions of the Loan Facility
applicable to it, (xi) any secured obligation of any Borrower secured under the
Credit Program becomes due and payable and (xii) any agreement in connection
with the Credit Program and the security therefor ceases to be legally valid,
binding or enforceable or performance thereof becomes unlawful. The
termination of any facility will result in the termination of all facilities
comprised by the Credit Program.
Interest
Rate and Fees
Borrowings
under the Loan Facilities (other than the Loan Facility provided to Ferromatik)
bear interest at a rate equal to one-month EURIBOR plus 1.75% per
annum. Borrowings under the Loan Facility provided to Ferromatik bear
interest at a rate equal to one-month EURIBOR plus 2.00%.
The
Borrowers must pay an unused line fee of 0.25% per annum on the average of the
daily unused amounts of the Program Limit, payable monthly, and if letters of
credit or guarantees are issued, a fee equal to the margin charged for that
month in addition to the issuing lender’s customary charges.
After the
occurrence of a default in payment under any Loan Facility, the Borrower under
the applicable facility will be required to pay default interest until the
payment default has been remedied at a rate equal to (x) in the case of Loan
Facilities other than the Loan Facility provided to Ferromatik, 2.00% per annum
over the interest rate otherwise then in effect and (y) in the case of the Loan
Facility provided to Ferromatik, 8.00% per annum over EURIBOR.
Factoring
Facility
Under the
Factoring Facility, Ferromatik will sell all of its eligible accounts
receivable, together with related security and ancillary rights, to the Factor
on an ongoing basis. The purchase price for approved accounts
receivable is paid in two payments: a first payment made upon purchase of the
receivable equal to 85% of the outstanding amount of the receivable and a second
payment made at a later date (in an amount that may or may not equal the
remainder of the outstanding amount of the receivable). For the risk
transfer, the Factor will receive a payment in the amount of one-month EURIBOR
plus 1.75% per annum on the amount of each first payment from the date of first
payment by the Factor to the date of payment on the underlying
receivable. Ferromatik is required to repurchase a sold receivable in
the event that a warranty related to such receivable is breached.