Office Depot gets $1.2 billion restated revolver with reduced pricing

By Marisa Wong

Morgantown, W.Va., May 17 – Office Depot, Inc. entered into a $1.2 billion second amended and restated credit agreement on May 13, according to an 8-K filing with the Securities and Exchange Commission.

The credit agreement amends and restates Office Depot’s existing $1.25 billion revolving credit facility to decrease the aggregate commitments under the facility to $1.2 billion, extend the maturity date to May 13, 2021 and reduce the applicable spread by 75 basis points.

The amended asset-based multi-currency revolver is subject to a borrowing base. Any existing letters of credit and loans issued and outstanding under the prior credit agreement will remain outstanding under the restated credit agreement.

The facility includes an up to $200 million sub-facility available to Office Depot and its European subsidiaries. The facility also includes an up to $400 million letter-of-credit sub-facility, as well as a swingline loan sub-facility of up to $125 million to Office Depot and an additional swingline loan sub-facility of up to $25 million to the European borrowers.

Under the amendment, the company may increase the aggregate amount of commitments under the facility by up to $250 million.

Borrowings will bear interest at adjusted Libor plus a margin based on average availability that ranges from 125 bps to 175 bps.

The commitment fee ranges from 25 bps to 37.5 bps.

The amendment also permits Office Depot to redeem, tender or otherwise repurchase its existing 9¾% senior notes subject to a $500 million minimum liquidity requirement and modifies some of the covenants under the prior credit agreement.

The covenant changes include the following:

• Amending the availability threshold that would trigger maintenance of a fixed-charge coverage ratio to $120 million from $125 million (or, if less, an amount equal to the lesser of 10% of the (a) aggregate commitments and (b) aggregate borrowing base then in effect);

• Increasing the ability of Office Depot and its subsidiaries that are either borrowers or guarantors under the facility to make investments, loans and advances in or to other subsidiaries that are not loan parties by meeting either (a) a fixed-charge coverage ratio of 1 to 1 and reduced availability test or (b) a $500 million minimum liquidity requirement;

• Permitting Office Depot to pay up to $125 million per year in restricted payments subject to a reduced $500 million minimum liquidity requirement; and

• Permitting additional restricted payments based on meeting a fixed-charge coverage ratio that was reduced from 1.10 to 1.00 and reduced availability test.

In addition, the restated credit agreement provides that in the event that the aggregate outstanding principal amount of Office Depot’s 9¾% senior notes is greater than $50 million on the 91st day prior to their maturity, the company will be required to maintain liquidity of at least $500 million at all times from that date through the earlier of the latest maturity date of the notes and the date on which the outstanding principal amount is $50 million or less.

The credit agreement also provides that if there is any outstanding principal amount of the 5.42% securitization notes due 2019 issued by subsidiary OMX Timber Finance Investment I, LLC on the 91st day prior to their maturity, then Office Depot will be required to maintain liquidity of at least $400 million from that date through the earlier of (a) the date on which those notes and the 4.98% installment notes held by OMX Timber Finance are extended, refinanced, replaced or renewed, so that none of those notes matures prior to the date that is 91 days after the maturity date of the credit facility and (b) the date on or after maturity of the installment notes.

JPMorgan Chase Bank, NA, Merrill Lynch Pierce Fenner & Smith Inc. and Wells Fargo Bank, NA are the joint lead arrangers and joint bookrunners. JPMorgan Chase Bank, NA, London Branch is the European administrative agent, and JPMorgan Chase Bank, NA is the administrative agent.

Office Depot is a Boca Raton, Fla.-based provider of products, services and solutions for the workplace.

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