Casella Waste Systems Inc. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Regulation FD Disclosure
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| Item 1.01 | Entry into a Material Definitive Agreement. |
On September 27, 2024, Casella Waste Systems, Inc. (the “Company”) entered into a Second Amended and Restated Credit Agreement by and among Bank of America, N.A., as administrative agent (“Administrative Agent”), Bank of America, N.A., as lender, and the other lenders party thereto (collectively, the “Lenders”), the Company, the Company’s subsidiaries identified therein and the other parties thereto (the “Credit Facility”), which amends and restates in its entirety the Company’s Amended and Restated Credit Agreement, dated as of December 21, 2021 (the “Existing Credit Agreement”). Proceeds of the Credit Facility refinanced the Company’s term loans under the Existing Credit Agreement, and may be used for working capital, permitted acquisitions, investments and dividends and distributions, and for other general corporate purposes.
General
The Credit Facility, under which the Company and its subsidiaries (subject to certain exceptions) are co-borrowers, provides for a term loan A facility in the principal amount of $800.0 million (the “Term Loan Facility”) and a revolving credit facility in the principal amount of up to $700.0 million, with a $155.0 million sublimit for letters of credit (the “Revolving Credit Facility”). Additional loans of up to the greater of $200.0 million (plus the amount of certain voluntary prepayments) and an additional amount (subject to the satisfaction of the applicable consolidated total net leverage ratio or consolidated secured net leverage ratio test) may be made available under the Credit Facility upon request of the Company, provided that the Company is not in default at the time of increase and other conditions as are reflected in the governing documents have been met, and subject to the receipt of commitments from, and agreement upon the terms and conditions of such additional loans with, Lenders for such additional amount.
Interest Rates
Amounts outstanding under the Credit Facility accrue interest, at the Company’s option, at a rate per annum equal to either: (1) the base rate, as defined in the Credit Facility or (2) the term secured overnight financing rate (“Term SOFR”), in each case plus an applicable interest margin. The applicable interest margin will be determined based on the Company’s consolidated total net leverage ratio, as defined in the Credit Facility, with the interest margin initially set at 1.925% for Term SOFR loans and 0.925% for base rate borrowings. The interest rate otherwise payable under the Credit Facility will be subject to increase by 2.00% per annum during the continuance of a payment default and may be subject to increase by 2.00% per annum during the continuance of any other event of default. The Credit Facility contains customary benchmark replacement provisions pursuant to which, upon certain triggering events, the SOFR benchmark used to calculate the Term SOFR rate will be replaced with a successor rate, on the terms and conditions in the Credit Facility. Further, commencing in the fiscal year ending December 31, 2024 until the date specified in the Credit Facility, the interest rate margin applied for drawn and undrawn amounts under the Credit Facility shall be separately adjusted based on the Company’s achievement of certain thresholds and targets on two sustainability related key performance indicator metrics during the fiscal year ended December 31, 2023 (“fiscal year 2023”): i) metric tons of solid waste materials reduced, reused or recycled through our direct operations or with third-parties in collaboration with customers; and ii) our total recordable incident rate.
Fees and Expenses
Certain customary fees and expenses are payable to the Lenders and the Administrative Agent under the Credit Facility, including a commitment fee on the unused portion of the Revolving Credit Facility that will be based on the Company’s consolidated net leverage ratio and will range from 0.200% to 0.400%. The initial commitment fee will be set at the rate of 0.300%. The Company will pay the revolving lenders a fee for letters of credit equal to the applicable interest margin for Term SOFR loans under the Revolving Credit Facility, subject to increase by 2.00% per annum during the continuance of an event of default. The Company will also pay each issuing bank of any letter of credit a fronting fee equal to 0.250% per annum on the face amount of each letter of credit, plus customary issuance, administrative and other fees and costs.
Amortization Payments on Term Loan
The Company is required to make scheduled quarterly payments on the term loan on the last business day of each March, June, September and December, commencing on the last business day of the fiscal quarter ending March 31, 2027, equal to (i) 0.25% of the initial aggregate stated principal amount of the term loans on the closing date, in the case of installments occurring on or before the last business day of the fiscal quarter ending December 31, 2027, and (ii) 0.625% of the initial aggregate stated principal amount of the term loans on the closing date, in the case of any installments occurring thereafter, with the balance due on the maturity date.
Maturity
The Credit Facility matures on September 27, 2029, subject to any extensions in accordance with the Credit Facility, at which time the applicable loans will become due and payable in full and the revolving commitments will terminate.
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Security and Guarantees
All obligations under the Credit Facility are secured by a first priority security interest in substantially all of the Company’s and the co-borrowers’ existing and future assets (except as described below), including a pledge of the stock or other equity interests of the Company’s domestic subsidiaries (subject to certain exclusions) and of any first tier foreign subsidiaries, provided that not more than 65% of the voting stock of any such foreign subsidiaries shall be required to be pledged. As of the closing date, the Credit Facility is not and is not required to be secured by any real property or any motor vehicles. However, the Administrative Agent has the right at any time to require the Credit Facility to be secured by real property and/or motor vehicles.
Covenants
The Credit Facility contains certain affirmative and negative covenants which, among other things and subject, in certain cases, to certain basket amounts, ratios and other exceptions, limit:
| • | the existence of additional indebtedness (including guarantees); |
| • | the existence of liens or other encumbrances or pledges, and the granting of negative pledges and restrictive agreements; |
| • | investments, loans and advances; |
| • | mergers, consolidations, acquisitions and sales, sale leasebacks, and other transfers of assets; |
| • | the payment of dividends and distributions and repurchases of equity; |
| • | prepayments of certain junior indebtedness, except in accordance with the terms of the Credit Facility; |
| • | change in lines of business; |
| • | use of loan proceeds; and |
| • | certain transactions with affiliates. |
The Credit Facility also requires that the Company meet financial tests, including, without limitation, the following ratios measured as of the end of each fiscal quarter:
| • | minimum consolidated EBITDA to consolidated cash interest charges ratio; and |
| • | maximum consolidated total funded debt (net of up to $100 million of cash and cash equivalents) to consolidated EBITDA ratio, or upon the election of the Company, maximum consolidated total funded debt secured by a lien (net of up to $100 million of cash and cash equivalents) to consolidated EBITDA ratio. |
Events of Default
The Credit Facility contains customary events of default, including, among other things:
| • | payment defaults; |
| • | inaccuracy or breaches of representations and warranties; |
| • | covenant defaults; |
| • | cross-defaults to certain other debt; |
| • | events of bankruptcy and insolvency; |
| • | judgment defaults; |
| • | revocation of loan documents or impairment of security interests in collateral; |
| • | a change of control, as defined in the Credit Facility; |
| • | certain ERISA events; and |
| • | failure of certain subordination provisions to be valid and enforceable. |
Waiver and Modification
The terms of the Credit Facility may be waived or modified upon approval by the Company, the other applicable co-borrowers, the requisite Lenders, and the Administrative Agent and letter of credit issuers, as applicable.
The foregoing summary of the material terms of the Credit Facility and the transactions contemplated thereby are qualified in their entirely by the complete text of the Credit Facility, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference as if fully set forth herein.
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| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The discussion of the Credit Facility set forth under Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
| Item 7.01 | Regulation FD Disclosure. |
On September 27, 2024, the Company announced the closing of the Credit Facility described in Item 1.01 above. A copy of the press release announcing the closing of the Credit Facility is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01 in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Safe Harbor Statement
Certain matters discussed in this Current Report on Form 8-K, including, but not limited to, the statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the availability of funds and use of proceeds under the Credit Facility, are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by the context of the statements, including words such as “believe,” “expect,” “anticipate,” “plan,” “may,” “would,” “intend,” “estimate,” “will,” “guidance” and other similar expressions, whether in the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates and management’s beliefs and assumptions. The Company cannot guarantee that, if and when needed, funding under the Credit Facility will be available to the Company.
Such forward-looking statements, and all phases of the Company’s operations, involve a number of risks and uncertainties, any one or more of which could cause actual results to differ materially from those described in its forward-looking statements. Such risks and uncertainties include or relate to, among other things: risks and uncertainties relating to the satisfaction of financial tests and customary conditions related to borrowings under the Credit Facility and the additional risks and uncertainties detailed in Item 1A. “Risk Factors” in the Company’s most recently filed Form 10-K, in Item 1A. “Risk Factors” in the Company’s most recently filed Form 10-Q and in other filings that the Company may make with the Securities and Exchange Commission in the future. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit No. |
Exhibit Description | |
| 10.1 | Second Amended and Restated Credit Agreement, dated as of September 27, 2024, among Casella Waste Systems, Inc., the subsidiaries of Casella Waste Systems, Inc. identified therein, Bank of America, N.A., as administrative agent, BofA Securities, Inc. and TD Securities (USA) LLC, as Sustainability Coordinators, the other letter of credit issuers and arrangers party thereto. | |
| 99.1 | Press Release of Casella Waste Systems, Inc. dated September 30, 2024. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document.** | |
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document.** | |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document.** | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). | |
| ** | Submitted Electronically Herewith | |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CASELLA WASTE SYSTEMS, INC. | ||||||
| Date: September 30, 2024 | By: | /s/ Bradford J. Helgeson | ||||
| Bradford J. Helgeson | ||||||
| Senior Vice President and Chief Financial Officer | ||||||
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