On March 31, 2022, United Therapeutics Corporation (the "Company") reported that entered into a Credit Agreement (the "Credit Agreement") with certain of its subsidiaries party thereto, as guarantors (the "Guarantors"), the lenders referred to therein, and Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent and as a swingline lender (Filing, 8-K, United Therapeutics, MAR 31, 2022, View Source [SID1234611348]). The Credit Agreement provides for (i) an unsecured, revolving credit facility of up to $1.2 billion; and (ii) a second unsecured, revolving credit facility of up to $800 million (which facilities may, subject to obtaining commitments from existing or new lenders for such increase and subject to other condition, be increased by up to $500 million in the aggregate). The facilities mature five years after the closing date of the Credit Agreement, subject to an ability of the lenders thereunder, or certain of the lenders thereunder, to elect to extend the maturity date of their commitments by one year following a request for such extension by the Company in accordance with the terms of the Credit Agreement, up to a maximum of two such extensions.
As of March 31, 2022, Lung Biotechnology PBC is the only subsidiary of the Company required to be a Guarantor and guarantee the Company’s obligations under the Credit Agreement. From time to time, one or more additional subsidiaries of the Company may be required to guarantee the Company’s obligations under the Credit Agreement.
At the Company’s option, the loan will bear interest at either an adjusted Term SOFR rate or a fluctuating base rate, in each case, plus an applicable margin that is determined on a quarterly basis based on the Company’s consolidated total leverage ratio (as calculated in accordance with the Credit Agreement).
The proceeds of borrowings under the Credit Agreement are available to refinance certain existing indebtedness of the Company and its subsidiaries and/or for working capital and other general corporate purposes. Upon closing of the Credit Agreement on March 31, 2022, the Company borrowed $800.0 million under the Credit Agreement, and used the funds to repay outstanding indebtedness under the 2018 Credit Agreement discussed under Item 1.02 below.
The Credit Agreement also contains customary affirmative and negative covenants that, among other things, limit the ability of the Company and its subsidiaries to: (a) incur indebtedness; (b) grant liens; (c) enter into a merger, consolidation, or amalgamation; (d) liquidate, wind up, or dissolve; or (e) sell all or substantially all of the property, business, or assets of the Company and its subsidiaries taken as a whole. In addition, as of the last day of each fiscal quarter, the Company must not permit (i) a consolidated ratio of total indebtedness to EBITDA to be greater than 3.00 to 1.00 (which ratio may, upon consummation of certain qualifying acquisitions, be increased to 3.50 to 1.00 for four fiscal quarters following such acquisition); and (ii) its consolidated interest coverage ratio to be less than 3.00 to 1.00, in each case calculated in accordance with the Credit Agreement.
The Credit Agreement contains customary events of default, including a change of control. Upon the occurrence and continuation of an event of default, all amounts due under the Credit Agreement and the other loan documents become (in the case of a bankruptcy event), or may become (in the case of all other events of default and at the option of the lenders), immediately due and payable.