Applied Materials lines up $2 billion term loan for Kokusai buyout

By Sarah Lizee

Olympia, Wash., Aug. 21 – Applied Materials, Inc. entered into an agreement with lenders for a $2 billion term loan with JPMorgan Chase Bank, NA as administrative agent on Monday, according to an 8-K filing with the Securities and Exchange Commission.

Lenders agreed to provide the term loan at or around closing of Applied’s $2.2 billion acquisition of Kokusai Electric Corp., which is expected to close within about 12 months and is subject to regulatory approvals and other customary closing conditions.

JPMorgan, BofA Securities, Inc., Citibank, NA, Mizuho Bank, Ltd., MUFG Bank, Ltd., U.S. Bank NA and Wells Fargo Securities, LLC are joint lead arrangers and bookrunners.

BofA, Citibank, Mizuho, MUFG, U.S. Bank and Wells Fargo are syndication agents. BNP Paribas and Goldman Sachs Bank USA are documentation agents.

Interest will be Libor plus 62.5 basis points to 112.5 bps, depending on debt ratings.

There is also a ticking fee that accrues on the amount of the unfunded term loan commitments from 90 days after the effective date of the term loan agreement until either the term loan is funded or the term loan commitments are terminated. The rate at which the ticking fee will accrue on the amount of the unfunded term loan commitments will range, depending on Applied’s public debt credit ratings, from 5 bps to 12.5 bps per year.

The maturity date will be three years from the funding date of the term loan.

A financial covenant requires Applied to maintain as at the end of each fiscal quarter a ratio of consolidated funded debt to consolidated adjusted EBITDA of not greater than 3.5 to 1.0, which maximum ratio may be temporarily increased at the election of Applied to 4 to 1 following certain material acquisitions.

Proceeds will be used for the acquisition and general corporate purposes.

Any unused commitments will expire on the earlier of the funding date of the term loan and the latest date on which the acquisition may close under the terms of the share purchase agreement, which is June 30, 2020, subject to two separate three-month extensions if, on the applicable date, the only remaining conditions to closing the acquisition relate to required regulatory approvals.

Also on Monday, Applied amended its revolver with JPMorgan as administrative agent to replace the financial covenant that required Applied to maintain as of the end of each fiscal quarter a ratio of consolidated funded debt to the sum of consolidated funded debt plus consolidated shareholders’ equity of not greater than 0.6 to 1.0 with the same financial covenant that applies to the term loan agreement.

Applied Materials is a Santa Clara, Calif., manufacturer of semiconductor equipment.

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