Constellation Brands, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Borrowings

Borrowings

9 Months Ended

Nov. 30, 2016

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS:

Borrowings consist of the following:



	November 30, 2016						February 29, 2016
	Current		Long-term		Total		Total
(in millions)
Notes payable to banks
Senior Credit Facility – Revolving Credit Loans	$	220.0	$	—	$	220.0	$	92.0
Other	133.4		—		133.4		316.3
	$	353.4	$	—	$	353.4	$	408.3

Long-term debt
Senior Credit Facility – Term Loans	$	192.5	$	3,641.8	$	3,834.3	$	2,856.8
Senior Notes	699.6		3,321.2		4,020.8		4,716.3
Other	23.6		399.5		423.1		99.8
	$	915.7	$	7,362.5	$	8,278.2	$	7,672.9

Senior credit facility –

In March 2016, the Company, CIH International S.à r.l., a wholly-owned indirect subsidiary of ours (“CIH”), CIH Holdings S.à r.l., a wholly-owned indirect subsidiary of ours (“CIHH”), Bank of America, N.A., as administrative agent (the “Administrative Agent”), and certain other lenders entered into a Restatement Agreement (the “March 2016 Restatement Agreement”) that amended and restated our prior senior credit facility (as amended and restated by the March 2016 Restatement Agreement, the “March 2016 Credit Agreement”). The principal changes effected by the March 2016 Restatement Agreement were:


•	The creation of a new $700.0 million European Term A-1 loan facility maturing on March 10, 2021;


•	An increase of the European revolving commitment under the revolving credit facility by $425.0 million to $1.0 billion;


•	The addition of CIHH as a new borrower under the new European Term A-1 loan facility and the European revolving commitment; and


•	The entry into a cross-guarantee agreement by CIH and CIHH whereby each guarantees the other’s obligations under the March 2016 Credit Agreement.

In October 2016, the Company, CIH, CIHH, CB International Finance S.à r.l., a wholly-owned indirect subsidiary of ours (“CB International” and together with CIH and CIHH, the “European Borrowers”), the Administrative Agent, and certain other lenders entered into a Restatement Agreement (the “2016 Restatement Agreement”) that amended and restated the March 2016 Credit Agreement (as amended and restated by the 2016 Restatement Agreement, the “2016 Credit Agreement”). The principal changes effected by the 2016 Restatement Agreement were:


•	The creation of a new $400.0 million European Term A-2 loan facility with CIH as the borrower, maturing on March 10, 2021;


•	An adjustment of the Incremental Facilities (as defined below) from a fixed amount to a flexible amount;


•	The addition of CB International as a new borrower under the European revolving commitment; and


•	The entry into an amended and restated cross-guarantee agreement by the European Borrowers whereby each guarantees the others’ obligations under the 2016 Credit Agreement.

In addition, the European obligations under the 2016 Credit Agreement are guaranteed by us and certain of our U.S. subsidiaries. These obligations are also secured by a pledge of (i) 100% of certain interests in certain of the European Borrowers’ subsidiaries and (ii) 100% of the ownership interests in certain of our U.S. subsidiaries and 65% of the ownership interests in certain of our foreign subsidiaries.

The 2016 Credit Agreement provides for aggregate credit facilities of $5,004.2 million, consisting of the following:



	Amount		Maturity
(in millions)
Revolving Credit Facility ^{(1) (2)}	$	1,150.0	July 16, 2020
U.S. Term A Facility ^{(1) (3)}	1,192.1		July 16, 2020
U.S. Term A-1 Facility ^{(1) (3)}	238.9		July 16, 2021
European Term A Facility ^{(1) (3)}	1,340.7		July 16, 2020
European Term A-1 Facility ^{(1) (3)}	682.5		March 10, 2021
European Term A-2 Facility ^{(1) (3)}	400.0		March 10, 2021
	$	5,004.2


⁽¹⁾	Contractual interest rate varies based on our debt ratio (as defined in the 2016 Credit Agreement) and is a function of LIBOR plus a margin, or the base rate plus a margin.

⁽²⁾

Provides for credit facilities consisting of a $150.0 million U.S. Revolving Credit Facility and a $1,000.0 million European Revolving Credit Facility. Includes two sub-facilities for letters of credit of up to $200.0 million in the aggregate. We are the borrower under the U.S. Revolving Credit Facility and we and/or CIH and/or CIHH and/or CB International are the borrowers under the European Revolving Credit Facility.


⁽³⁾	We are the borrower under the U.S. Term A and the U.S. Term A-1 loan facilities. CIH is the borrower under the European Term A and the European Term A-2 loan facilities. CIHH is the borrower under the European Term A-1 loan facility.

The 2016 Credit Agreement also permits us to elect, subject to the willingness of existing or new lenders to fund such increase or term loans and other customary conditions, to increase the revolving credit commitments or add one or more tranches of additional term loans (the “Incremental Facilities”). The Incremental Facilities may not exceed $750.0 million plus an unlimited amount so long as our leverage ratio, as defined and computed pursuant to the 2016 Credit Agreement, is no greater than 4.50 to 1.00 for the period defined pursuant to the 2016 Credit Agreement.

As of November 30, 2016, information with respect to borrowings under the 2016 Credit Agreement is as follows:



	Revolving Credit Facility			U.S. Term A Facility ⁽¹⁾			U.S. Term A-1 Facility ⁽¹⁾			European Term A Facility ⁽¹⁾			European Term A-1 Facility ⁽¹⁾			European Term A-2 Facility ⁽¹⁾
(in millions)
Outstanding borrowings	$	220.0		$	1,184.4		$	238.5		$	1,334.1		$	679.6		$	397.7
Interest rate	2.1		%	2.0		%	2.3		%	2.0		%	2.0		%	2.0		%
Libor margin	1.5		%	1.5		%	1.75		%	1.5		%	1.5		%	1.5		%
Outstanding letters of credit	$	16.7
Remaining borrowing capacity	$	913.3


⁽¹⁾	Outstanding term loan facility borrowings are net of unamortized debt issuance costs.

As of November 30, 2016, the required principal repayments of the term loans under the 2016 Credit Agreement (excluding unamortized debt issuance costs of $19.9 million) for the remaining three months of fiscal 2017 and for each of the five succeeding fiscal years are as follows:



	U.S. Term A Facility		U.S. Term A-1 Facility		European Term A Facility		European Term A-1 Facility		European Term A-2 Facility		Total
(in millions)
2017	$	15.9	$	0.6	$	17.8	$	8.8	$	5.0	$	48.1
2018	63.6		2.4		71.5		35.0		20.0		192.5
2019	63.6		2.4		71.5		35.0		20.0		192.5
2020	63.6		2.4		71.5		35.0		20.0		192.5
2021	985.4		2.4		1,108.4		35.0		20.0		2,151.2
2022	—		228.7		—		533.7		315.0		1,077.4
	$	1,192.1	$	238.9	$	1,340.7	$	682.5	$	400.0	$	3,854.2

Interest rate swap contracts –

In April 2012, we entered into interest rate swap agreements which fixed our interest rates on $500.0 million of our floating LIBOR rate debt at an average rate of 2.8% (exclusive of borrowing margins) through September 1, 2016. We have entered into additional interest rate swap agreements which fixed our interest rates on $250.0 million of our floating LIBOR rate debt at an average rate of 1.1% (exclusive of borrowing margins) from September 1, 2016, through July 1, 2020.

Senior notes –

In August 2006, we issued $700.0 million aggregate principal amount of 7.25% Senior Notes due September 2016 (the “August 2006 Senior Notes”). On August 30, 2016, we repaid the August 2006 Senior Notes primarily with cash flows from operating activities.

In December 2016, we issued $600.0 million aggregate principal amount of 3.70% Senior Notes due December 2026 (the “December 2016 Senior Notes”). Proceeds from this offering, net of discount and debt issuance costs, were $594.7 million. Interest on the December 2016 Senior Notes is payable semiannually on June 6 and December 6 of each year, beginning June 6, 2017. The December 2016 Senior Notes are redeemable, in whole or in part, at our option at any time prior to September 6, 2026, at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 25 basis points. On or after September 6, 2026, we may redeem the December 2016 Senior Notes, in whole or in part, at our option at any time at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest. The December 2016 Senior Notes are senior unsecured obligations which rank equally in right of payment to all of our existing and future senior unsecured indebtedness. Certain of our U.S. subsidiaries guarantee the December 2016 Senior Notes on a senior unsecured basis.

Other –

Canadian credit agreement:

In June 2016, through a wholly-owned indirect subsidiary of ours, we entered into a new secured Canadian credit agreement which provided for a C$275.0 million term loan facility ($214.1 million at issuance) and a C$50.0 million revolving credit facility which was undrawn at issuance (the “Canadian Credit Agreement”). The interest rate varied based on the subsidiary’s consolidated leverage ratio (as defined in the Canadian Credit Agreement) and was a function of a base rate plus a margin. As of November 30, 2016, under the Canadian Credit Agreement, there were outstanding term loan borrowings of C$275.0 million, or $204.7 million (excluding unamortized debt issuance costs of $0.7 million), bearing an interest rate of 2.6%. There were no outstanding revolver borrowings under the Canadian Credit Agreement as of November 30, 2016. In connection with the Canadian Divestiture in December 2016, our obligations associated with the Canadian Credit Agreement terminated.

Other long-term debt:

We have outstanding borrowings with our glass production plant joint venture partner, Owens-Illinois, which are included in our consolidated balance sheet as of November 30, 2016, in accordance with our consolidation of this variable interest entity. These borrowings have a maturity date of December 2064 with both a fixed and variable interest rate component. The variable interest rate is based upon certain performance measures as defined in the contractual agreement. As of November 30, 2016, amounts outstanding under the contractual agreement were $168.0 million with a weighted average interest rate of 7.0%.

Accounts receivable securitization facilities:

On September 27, 2016, we amended our prior trade accounts receivable securitization facility (as amended, the “CBI Facility”) for an additional 364-day term. Under the CBI Facility, trade accounts receivable generated by us and certain of our subsidiaries are sold by us to a wholly-owned bankruptcy remote single purpose subsidiary, the CBI SPV, which is consolidated by us for financial reporting purposes. The CBI Facility provides borrowing capacity of $235.0 million up to $340.0 million structured to account for the seasonality of our business, subject to further limitations based upon various pre-agreed formulas. The remaining provisions of the CBI Facility are substantially identical in all material respects to the prior CBI facility.

Also, on September 27, 2016, Crown Imports amended its prior trade accounts receivable securitization facility (as amended, the “Crown Facility”) for an additional 364-day term. Under the Crown Facility, trade accounts receivable generated by Crown Imports are sold by Crown Imports to its wholly-owned bankruptcy remote single purpose subsidiary, the Crown SPV, which is consolidated by us for financial reporting purposes. The Crown Facility provides borrowing capacity of $120.0 million up to $210.0 million structured to account for the seasonality of Crown Imports’ business. The remaining provisions of the Crown Facility are substantially identical in all material respects to the prior Crown facility.

As of November 30, 2016, our accounts receivable securitization facilities are as follows:



	Outstanding Borrowings		Weighted Average Interest Rate		Remaining Borrowing Capacity
(in millions)
CBI Facility	$	97.0	1.5	%	$	208.0
Crown Facility	$	—	—	%	$	150.0