Credit Agreement
On August 18, 2022, Seagate Technology Holdings plc and Seagate HDD Cayman (“Seagate HDD” or the “Borrower”) entered into an amendment to its Credit Agreement (the “Sixth Amendment”), which provided for a new term loan facility in the aggregate principal amount of $600 million (“Term Loan A3”). Term Loan A3 was borrowed in full at the closing of the Sixth Amendment. The Sixth Amendment to the Credit Agreement also replaced the LIBOR interest rates plus variable margin for the Term Loans A1 and A2 with the SOFR interest rates plus a variable margin that will be determined based on the corporate credit rating of the Borrower or one of its parent entities. The Sixth Amendment also permits the Borrower to increase the revolving loan commitments or obtain new term loans of up to $100 million in aggregate (the “Incremental Facility”), subject to the satisfaction of certain terms and conditions.
On November 8, 2022, Seagate Technology Holdings plc (“STX”) and the Borrower entered into an amendment to its Credit Agreement (the “Seventh Amendment”), to increase the maximum permitted total leverage ratio the Company must comply with during the covenant relief period that ends on June 28, 2024 and prohibit the Company from pursuing the use of the Incremental Facility during the covenant relief period. The maximum permitted total leverage ratio is 5.0 to 1.0 from the fiscal quarters ending December 30, 2022 to June 30, 2023. For the fiscal quarter ending September 29, 2023, the maximum permitted total leverage ratio is 4.75 to 1.0 and then steps down to 4.5 to 1.0 from the fiscal quarters ending December 29, 2023 to June 28, 2024. The maximum permitted leverage ratio will return to 4.0 to 1.0 for any fiscal quarter ending after June 28, 2024.
The Credit Agreement provides a term loan facility in an aggregate principal amount of $1.8 billion that is extended in three tranches of $600 million each for Term Loans A1, A2 and A3, and a $1.75 billion senior unsecured revolving credit facility (“Revolving Credit Facility”). As of December 30, 2022, no borrowings (including swingline loans) were outstanding and no commitments were utilized for letters of credit issued under the Revolving Credit Facility. STX and certain of its material subsidiaries, including Seagate Technology Unlimited Company, fully and unconditionally guarantee both the Revolving Credit Facility and the Term Loans A1, A2 and A3 (the “Term Loans”). The Credit Agreement includes three financial covenants: (1) interest coverage ratio, (2) total leverage ratio and (3) a minimum liquidity amount. The Company was in compliance with the covenants as of December 30, 2022.