Item 1.01
Entry into a Material Definitive Agreement.
On February 12, 2018, American Woodmark Corporation, a Virginia corporation (the “Company”), the domestic subsidiaries of the Company, as guarantors, and Wells Fargo Bank, National Association, as trustee (the “Trustee”), entered into an Indenture, dated as of February 12, 2018 (the “Indenture”), pursuant to which the Company issued $350 million aggregate principal amount of its 4.875% Senior Notes due 2026 (the “Notes”). The Notes will mature on March 15, 2026. Interest on the Notes will accrue from February 12, 2018 and is payable semi-annually in cash in arrears on March 15 and September 15 of each year, beginning on September 15, 2018.
The Notes will be senior unsecured indebtedness of the Company and will be:
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equal in right of payment with all of the Company’s existing and future unsubordinated indebtedness;
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senior in right of payment to any existing or future subordinated indebtedness;
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effectively subordinated to all of the Company’s secured indebtedness, including indebtedness under the Senior Secured Credit Facilities (as defined below), to the extent of the value of the assets securing such indebtedness; and
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structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s non-guarantor subsidiaries.
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The Notes will be fully and unconditionally guaranteed, jointly and severally, by each of the Company’s current and future wholly-owned domestic subsidiaries that guarantees the obligations of the Company under the Senior Secured Credit Facilities (each a “Guarantor”). These guarantees are subject to limitation under applicable laws and may be released in certain specified circumstances. The guarantee of each Guarantor will be a senior unsecured obligation of that Guarantor and will be:
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equal in right of payment with all existing and future unsubordinated indebtedness of that Guarantor;
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senior in right of payment to any existing and future subordinated indebtedness of that Guarantor; and
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effectively subordinated to all secured indebtedness of that Guarantor to the extent of the value of the assets securing such indebtedness, including any such Guarantor’s guarantee of indebtedness under the Senior Secured Credit Facilities.
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The Company may redeem the Notes, in whole or in part, at any time (a) prior to March 15, 2021, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the make-whole premium set forth in the Indenture, and (b) on or after March 15, 2021, at the redemption prices set forth in the Indenture. In addition, prior to March 15, 2021, the Company may redeem on one or more occasions up to 40% of the aggregate principal amount of the Notes issued under the Indenture at a redemption price equal to 104.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to the applicable redemption date with the net cash proceeds of one or more equity offerings. If the Company experiences specific kinds of changes of control, the Company must offer to repurchase all of the Notes (unless otherwise redeemed) at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
The Indenture governing the Notes will, among other things, limit the Company’s ability and the ability of its Restricted Subsidiaries (as defined in the Indenture) to (i) incur additional indebtedness or issue certain preferred shares; (ii) create liens; (iii) pay dividends, redeem stock or make other distributions; (iv) make investments; (v) create restrictions on the ability of its Restricted Subsidiaries to pay dividends to the Company or make other intercompany transfers; (vi) transfer or sell assets; (vii) merge or consolidate; and (viii) enter into certain transactions with affiliates of the Company. These covenants are subject to important qualifications and exceptions described in the Indenture. If, on any date following the date of the Indenture, the Notes have investment grade ratings from both Moody’s Investors Service, Inc. and Standard & Poor’s Financial Services LLC and no default has occurred and is continuing under the Indenture, certain of these covenants will be suspended.
The Indenture provides for customary events of default, including (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the Notes; (iii) failure by the Company or any of its Restricted Subsidiaries to comply with certain covenants or agreements in the Notes, the Indenture or related documents (subject to applicable
time periods provided for compliance or cure); (iv) default by the Company or any Restricted Subsidiary under their respective debt obligations that results in acceleration of the maturity of such debt, or failure to pay any such debt at maturity, in an aggregate amount of $50.0 million or more; (v) failure by the Company or any Restricted Subsidiary to pay final judgments aggregating in excess of $50.0 million, to the extent not paid or covered by insurance, which judgments are not paid, discharged or stayed for a period of 60 days; (vi) the guarantee of any Guarantor that is a Significant Subsidiary (as defined in the Indenture), or group of Guarantors that, together, would constitute a Significant Subsidiary, is held in a judicial proceeding to be unenforceable or invalid or ceases for any reason (other than in accordance with the Indenture) to be in full force and effect; and (vii) certain events of bankruptcy or insolvency of the Company or certain of its subsidiaries. If an event of default arising from certain events of bankruptcy or insolvency occurs, all outstanding Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the Trustee or the registered holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare all the Notes due and payable immediately.
The foregoing summary of the Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the Indenture, a copy of which is filed as Exhibit 4.1 hereto and incorporated herein by reference.