Constellation Brands, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Borrowings

Borrowings

12 Months Ended

Feb. 28, 2018

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS:

Borrowings consist of the following:



	February 28, 2018						February 28, 2017
	Current		Long-term		Total		Total
(in millions)
Short-term borrowings
Senior credit facility, Revolving credit loans	$	79.0					$	231.0
Commercial paper	266.9						—
Other	400.9						375.5
	$	746.8					$	606.5

Long-term debt
Senior credit facility, Term loans	$	5.0	$	492.7	$	497.7	$	3,787.5
Senior notes	—		8,674.2		8,674.2		4,617.0
Other	17.3		250.7		268.0		227.1
	$	22.3	$	9,417.6	$	9,439.9	$	8,631.6

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 then existing 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 “2016 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 2016 European Borrowers whereby each guarantees the others’ obligations under the 2016 Credit Agreement.

In May 2017, we repaid the outstanding obligations under the U.S. Term A loan facility under the 2016 Credit Agreement primarily with a portion of the proceeds from the May 2017 senior notes and revolver borrowings under the 2016 Credit Agreement.

In July 2017, the Company, CIH, CB International (together with CIH, the “European Borrowers”), CIHH, the Administrative Agent, and certain other lenders entered into a Restatement Agreement (the “2017 Restatement Agreement”) that amended and restated the 2016 Credit Agreement (as amended and restated by the 2017 Restatement Agreement, the “2017 Credit Agreement”). The principal changes effected by the 2017 Restatement Agreement were:


•	The refinance and increase of the existing U.S. Term A-1 loan facility with a new $500.0 million U.S. Term A-1 loan facility and extension of its maturity to July 14, 2024;


•	The creation of a new $2.0 billion European Term A loan facility into which the then existing European Term A loan facility, European Term A-1 loan facility and European Term A-2 loan facility were combined;


•	The increase of the revolving credit facility by $350.0 million to $1.5 billion and extension of its maturity to July 14, 2022; and


•	The removal of CIHH as a borrower under the 2017 Restatement Agreement.

In addition, the Company and certain of our U.S. subsidiaries executed an amended and restated guarantee agreement which, among other things, released certain of our U.S. subsidiaries as guarantors of borrowings under the 2017 Credit Agreement. Furthermore, the European Borrowers executed an amended and restated cross-guarantee agreement which, among other things, removed CIHH as a party to the amended and restated cross-guarantee agreement. The U.S. obligations under the 2017 Credit Agreement are guaranteed by certain of our U.S. subsidiaries. The European obligations under the 2017 Credit Agreement are guaranteed by us and certain of our U.S. subsidiaries. The European obligations are cross-guaranteed by the European Borrowers whereby each guarantees the other’s obligations.

In November 2017, we repaid the outstanding obligations under the European Term A loan facility under the 2017 Credit Agreement primarily with proceeds from the November 2017 senior notes. Accordingly, as of February 28, 2018, the 2017 Credit Agreement provides for aggregate credit facilities of $2,000.0 million, consisting of the following:



	Amount		Maturity
(in millions)
Revolving Credit Facility ^{(1) (2)}	$	1,500.0	July 14, 2022
U.S. Term A-1 Facility ^{(1) (3)}	500.0		July 14, 2024
	$	2,000.0


⁽¹⁾	Contractual interest rate varies based on our debt rating (as defined in the 2017 Credit Agreement) and is a function of LIBOR plus a margin, or the base rate plus a margin.

⁽²⁾

Consists of a $190.0 million U.S. Revolving Credit Facility and a $1,310.0 million European Revolving Credit Facility. We are the borrower under the $1,500.0 million Revolving Credit Facility (inclusive of the U.S. Revolving Credit Facility and the European Revolving Credit Facility). CIH and/or CB International are additional borrowers under the European Revolving Credit Facility. Includes two sub-facilities for letters of credit of up to $200.0 million in the aggregate.


⁽³⁾	We are the borrower under the U.S. Term A-1 loan facility.

The 2017 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 be an unlimited amount so long as our leverage ratio, as defined and computed pursuant to the 2017 Credit Agreement, is no greater than 4.00 to 1.00 subject to certain limitations for the period defined pursuant to the 2017 Credit Agreement.

We and our subsidiaries are subject to covenants that are contained in the 2017 Credit Agreement, including those restricting the incurrence of additional indebtedness (including guarantees of indebtedness) by subsidiaries that are not guarantors, additional liens, mergers and consolidations, transactions with affiliates, and sale and leaseback transactions, in each case subject to numerous conditions, exceptions and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio.

As of February 28, 2018, information with respect to borrowings under the 2017 Credit Agreement is as follows:



	Revolving Credit Facility			U.S. Term A-1 Facility ⁽¹⁾
(in millions)
Outstanding borrowings	$	79.0		$	497.7
Interest rate	2.9		%	3.1		%
LIBOR margin	1.25		%	1.55		%
Outstanding letters of credit	$	13.7
Remaining borrowing capacity ⁽²⁾	$	1,140.3


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


⁽²⁾	Net of outstanding revolving credit facility borrowings and outstanding letters of credit under the 2017 Credit Agreement and outstanding borrowings under our commercial paper program of $267.0 million (excluding unamortized discount) (see “Commercial paper program”).

Commercial paper program –

In October 2017, we implemented a commercial paper program which provides for the issuance of up to an aggregate principal amount of $1.0 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2017 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility under our 2017 Credit Agreement. As of February 28, 2018, we had $266.9 million of outstanding borrowings, net of unamortized discount, under our commercial paper program with a weighted average annual interest rate of 2.1% and a weighted average remaining term of 10 days.

Senior notes –

Our outstanding senior notes are as follows:



			Date of			Outstanding Balance ⁽¹⁾
	Principal		Issuance	Maturity	Interest Payments	February 28, 2018		February 28, 2017
(in millions)
7.25% Senior Notes ⁽²⁾	$	700.0	Jan 2008	May 2017	May/Nov	$	—	$	699.9
6.00% Senior Notes ^{(2) (3)}	$	600.0	Apr 2012	May 2022	May/Nov	—		594.9
3.75% Senior Notes ^{(2) (4)}	$	500.0	May 2013	May 2021	May/Nov	498.0		497.4
4.25% Senior Notes ^{(2) (4)}	$	1,050.0	May 2013	May 2023	May/Nov	1,044.4		1,043.4
3.875% Senior Notes ^{(2) (4)}	$	400.0	Nov 2014	Nov 2019	May/Nov	397.9		396.8
4.75% Senior Notes ^{(2) (4)}	$	400.0	Nov 2014	Nov 2024	May/Nov	395.9		395.4
4.75% Senior Notes ^{(2) (4)}	$	400.0	Dec 2015	Dec 2025	Jun/Dec	395.3		394.8
3.70% Senior Notes ^{(2) (5)}	$	600.0	Dec 2016	Dec 2026	Jun/Dec	594.9		594.4
2.70% Senior Notes ^{(2) (5)}	$	500.0	May 2017	May 2022	May/Nov	495.9		—
3.50% Senior Notes ^{(2) (5)}	$	500.0	May 2017	May 2027	May/Nov	495.1		—
4.50% Senior Notes ^{(2) (5)}	$	500.0	May 2017	May 2047	May/Nov	492.7		—
2.00% Senior Notes ^{(2) (6)}	$	600.0	Nov 2017	Nov 2019	May/Nov	596.8		—
2.25% Senior Notes ^{(2) (6)}	$	700.0	Nov 2017	Nov 2020	May/Nov	695.0		—
2.65% Senior Notes ^{(2) (5)}	$	700.0	Nov 2017	Nov 2022	May/Nov	692.3		—
3.20% Senior Notes ^{(2) (5)}	$	600.0	Feb 2018	Feb 2023	Feb/Aug	595.0		—
3.60% Senior Notes ^{(2) (5)}	$	700.0	Feb 2018	Feb 2028	Feb/Aug	693.2		—
4.10% Senior Notes ^{(2) (5)}	$	600.0	Feb 2018	Feb 2048	Feb/Aug	591.8		—
						$	8,674.2	$	4,617.0


⁽¹⁾	Amounts are net of unamortized debt issuance costs and unamortized discounts, where applicable.


⁽²⁾	Senior unsecured obligations which rank equally in right of payment to all of our existing and future senior unsecured indebtedness. Guaranteed by certain of our U.S. subsidiaries on a senior unsecured basis.


⁽³⁾	Redeemed prior to maturity in February 2018 at a redemption price equal to 100% of the outstanding principal amount, plus accrued and unpaid interest and a make-whole payment of $73.6 million. The make-whole payment is included in loss on extinguishment of debt.


⁽⁴⁾	Redeemable, 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 and a make-whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 50 basis points.

⁽⁵⁾

Redeemable, in whole or in part, at our option at any time prior to the stated redemption date as defined in the indenture, 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 the stated basis points as defined in the indenture. On or after the stated redemption date, redeemable, 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.



	Redemption
	Stated Redemption Date	Stated Basis Points
3.70% Senior Notes due December 2026	Sept 2026	25
2.70% Senior Notes due May 2022	Apr 2022	15
3.50% Senior Notes due May 2027	Feb 2027	20
4.50% Senior Notes due May 2047	Nov 2046	25
2.65% Senior Notes due November 2022	Oct 2022	15
3.20% Senior Notes due February 2023	Jan 2023	13
3.60% Senior Notes due February 2028	Nov 2027	15
4.10% Senior Notes due February 2048	Aug 2047	20


⁽⁶⁾	Redeemable, in whole or in part, at our option at any time prior to maturity, 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 10 basis points.

Indentures –

Our indentures relating to our outstanding senior notes contain certain covenants, including, but not limited to: (i) a limitation on liens on certain assets, (ii) a limitation on certain sale and leaseback transactions, and (iii) restrictions on mergers, consolidations and the transfer of all or substantially all of our assets to another person.

Subsidiary credit facilities –

General:

We have additional credit arrangements totaling $503.5 million and $442.8 million as of February 28, 2018, and February 28, 2017, respectively. As of February 28, 2018, and February 28, 2017, amounts outstanding under these arrangements were $277.0 million and $269.5 million, respectively, the majority of which is classified as long-term as of the respective date. These arrangements primarily support the financing needs of our domestic and foreign subsidiary operations, as well as our glass production plant joint venture (see “Other long-term debt”). Interest rates and other terms of these borrowings vary from country to country, depending on local market conditions.

Other long-term debt:

During the year ended February 28, 2017, we recorded an immaterial adjustment related to the prior period for the noncash conversion of $132.0 million from noncontrolling equity interests to long-term debt associated with a contractual agreement with our glass production plant joint venture partner, Owens-Illinois. As of February 28, 2018, and February 28, 2017, outstanding borrowings under this contractual agreement were $230.5 million and $183.5 million, respectively. Amounts outstanding under the contractual agreement are included in our consolidated balance sheet in accordance with our consolidation of this VIE. 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 February 28, 2018, the weighted average interest rate for amounts outstanding under the contractual agreement was 4.3%.

Debt payments –

As of February 28, 2018, the required principal repayments under long-term debt obligations (excluding unamortized debt issuance costs and unamortized discounts of $63.6 million and $13.3 million, respectively) for each of the five succeeding fiscal years and thereafter are as follows:



(in millions)
2019	$	22.3
2020	1,016.1
2021	711.6
2022	507.5
2023	1,805.0
Thereafter	5,454.3
	$	9,516.8

Accounts receivable securitization facilities –

We have a 364-day revolving trade accounts receivable securitization facility (the “CBI Facility”), and Crown Imports, a wholly-owned indirect subsidiary of ours, has a 364-day revolving trade accounts receivable securitization facility (the “Crown Facility”), both of which are amended annually, generally under substantially identical provisions in all material respects to the prior facilities.

Under the CBI Facility, trade accounts receivable generated by us and certain of our subsidiaries are sold by us to our wholly-owned bankruptcy remote single purpose subsidiary (the “CBI SPV”), which is consolidated by us for financial reporting purposes. 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. These receivables have been pledged by the CBI SPV and the Crown SPV to secure borrowings under the CBI Facility and the Crown Facility, respectively, with such receivables serviced by us and Crown, respectively. The receivable balances related to the CBI Facility and the Crown Facility are reported as accounts receivable on our balance sheets, but the receivables are at all times owned by the CBI SPV and the Crown SPV, respectively, and are included on our financial statements as required by generally accepted accounting principles.

Under both facilities, there are two lenders, one holding 60% of the aggregate facility and the other holding 40% of the aggregate facility. Borrowings under the CBI Facility and the Crown Facility are recorded as secured borrowings and bear interest as follows: (i) 60% of the borrowings are charged at that lender’s cost of funds plus a margin of 75 basis points and (ii) 40% of the borrowings are charged at one-month LIBOR plus a margin of 75 basis points. The CBI Facility provides borrowing capacity of $230.0 million up to $330.0 million structured to account for the seasonality of our business, subject to further limitations based upon various pre-agreed formulas. The Crown Facility provides borrowing capacity of $130.0 million up to $250.0 million structured to account for the seasonality of Crown Imports’ business.

As of February 28, 2018, our accounts receivable securitization facilities are as follows:



	Outstanding Borrowings		Weighted Average Interest Rate		Remaining Borrowing Capacity
(in millions)
CBI Facility	$	246.9	2.4	%	$	13.1
Crown Facility	$	145.0	2.4	%	$	—