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, 2019

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS:

Borrowings consist of the following:



	February 28, 2019						February 28, 2018
	Current		Long-term		Total		Total
(in millions)
Short-term borrowings
Senior credit facility, Revolving credit loan	$	59.0					$	79.0
Commercial paper	732.5						266.9
Other	—						400.9
	$	791.5					$	746.8

Long-term debt
Senior credit facility, Term loan	$	5.0	$	487.8	$	492.8	$	497.7
Term loan credit facilities	50.0		1,436.4		1,486.4		—
Senior notes	997.8		9,819.1		10,816.9		8,674.2
Other	12.4		16.5		28.9		268.0
	$	1,065.2	$	11,759.8	$	12,825.0	$	9,439.9

Bank facilities –

Senior credit facility:

In March 2016, the Company, CIH International S.à r.l., a wholly-owned subsidiary of ours (“CIH”), CIH Holdings S.à r.l., a wholly-owned 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 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 by $261.1 million to $500.0 million 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.

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.

In August 2018, the Company, CIH, CB International, certain of the Company’s subsidiaries as guarantors, the Administrative Agent, and certain other lenders entered into a Restatement Agreement (the “August 2018 Restatement Agreement”) that amended and restated the 2017 Credit Agreement (as amended and restated by the August 2018 Restatement Agreement, the “August 2018 Credit Agreement”). The principal changes effected by the August 2018 Restatement Agreement were:


•	The removal of CIH as a borrower under the August 2018 Credit Agreement;


•	The termination of a cross-guarantee agreement by the European Borrowers; and


•	The addition of a mechanism to provide for the replacement of LIBOR with an alternative benchmark rate in certain circumstances where LIBOR cannot be adequately ascertained or available.

In September 2018, the Company, CB International, certain of the Company’s subsidiaries as guarantors, the Administrative Agent, and certain other lenders entered into a Restatement Agreement (the “2018 Restatement Agreement”) that amended and restated the August 2018 Credit Agreement (as amended and restated by the 2018 Restatement Agreement, the “2018 Credit Agreement”). The primary change effected by the 2018 Restatement Agreement was the increase of the revolving credit facility from $1.5 billion to $2.0 billion and extension of its maturity to September 14, 2023. The 2018 Restatement Agreement also modified certain financial covenants in connection with the November 2018 Canopy Transaction and added various representations and warranties, covenants and an event of default related to the November 2018 Canopy Transaction.

Term Credit Agreement:

In September 2018, the Company, the Administrative Agent, and certain other lenders entered into a term loan credit agreement (the “Term Credit Agreement”). The Term Credit Agreement provides for aggregate credit facilities of $1.5 billion, consisting of a $500.0 million three-year term loan facility (the “Three-Year Term Facility”) and a $1.0 billion five-year term loan facility (the “Five-Year Term Facility”).

The Three-Year Term Facility is not subject to amortization payments, with the balance due and payable at maturity. The Five-Year Term Facility will be repaid in quarterly payments of principal equal to 1.25% of the original aggregate principal amount of the Five-Year Term Facility, with the balance due and payable at maturity.

General:

The obligations under the 2018 Credit Agreement and the Term Credit Agreement are guaranteed by certain of our U.S. subsidiaries. We and our subsidiaries are subject to covenants that are contained in the 2018 Credit Agreement and the Term 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.

Our senior credit facility 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 our senior credit facility, is no greater than 4.00 to 1.00 subject to certain limitations for the period defined pursuant to our senior credit facility.

As of February 28, 2019, aggregate credit facilities under the 2018 Credit Agreement and the Term Credit Agreement consist of the following:



	Amount		Maturity		Amount		Maturity
(in millions)
2018 Credit Agreement				Term Credit Agreement
Revolving Credit Facility ^{(1) (2)}	$	2,000.0	Sept 14, 2023	Three-Year Term Facility ^{(1) (3)}	$	500.0	Nov 1, 2021
U.S. Term A-1 Facility ^{(1) (3)}	500.0		July 14, 2024	Five-Year Term Facility ^{(1) (3)}	1,000.0		Nov 1, 2023
	$	2,500.0			$	1,500.0


⁽¹⁾	Contractual interest rate varies based on our debt rating (as defined in the respective agreement) and is a function of LIBOR plus a margin, or the base rate plus a margin, or, in certain circumstances where LIBOR cannot be adequately ascertained or available, an alternative benchmark rate plus a margin.


⁽²⁾	We and/or CB International are the borrower under the $2,000.0 million Revolving Credit Facility. Includes a sub-facility for letters of credit of up to $200.0 million.


⁽³⁾	We are the borrower under the U.S. Term A-1 loan facility, the Three-Year Term Facility and the Five-Year Term Facility.

As of February 28, 2019, information with respect to borrowings under the 2018 Credit Agreement and the Term Credit Agreement is as follows:



	2018 Credit Agreement						Term Credit Agreement
	Revolving Credit Facility			U.S. Term A Facility ⁽¹⁾			Three-Year Term Facility ⁽¹⁾			Five-Year Term Facility ⁽¹⁾
(in millions)
Outstanding borrowings	$	59.0		$	492.8		$	499.5		$	986.9
Interest rate	3.6		%	4.0		%	3.6		%	3.8		%
LIBOR margin	1.13		%	1.50		%	1.13		%	1.25		%
Outstanding letters of credit	$	10.8
Remaining borrowing capacity ⁽²⁾	$	1,196.7


⁽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 2018 Credit Agreement and outstanding borrowings under our commercial paper program of $733.5 million (excluding unamortized discount) (see “Commercial paper program”).

Commercial paper program –

In October 2017, we implemented a commercial paper program which provided for the issuance of up to an aggregate principal amount of $1.0 billion of commercial paper. In October 2018, our Board of Directors authorized a $1.0 billion increase to our commercial paper program, thereby providing for the issuance of up to an aggregate principal amount of $2.0 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2018 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility under our 2018 Credit Agreement. As of February 28, 2019, we had $732.5 million of outstanding borrowings, net of unamortized discount, under our commercial paper program with a weighted average annual interest rate of 3.0% and a weighted average remaining term of 18 days. 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, 2019		February 28, 2018
(in millions)
3.75% Senior Notes ^{(2) (3)}	$	500.0	May 2013	May 2021	May/Nov	$	498.6	$	498.0
4.25% Senior Notes ^{(2) (3)}	$	1,050.0	May 2013	May 2023	May/Nov	1,045.4		1,044.4
3.875% Senior Notes ^{(2) (3)}	$	400.0	Nov 2014	Nov 2019	May/Nov	399.1		397.9
4.75% Senior Notes ^{(2) (3)}	$	400.0	Nov 2014	Nov 2024	May/Nov	396.4		395.9
4.75% Senior Notes ^{(2) (3)}	$	400.0	Dec 2015	Dec 2025	Jun/Dec	395.8		395.3
3.70% Senior Notes ^{(2) (4)}	$	600.0	Dec 2016	Dec 2026	Jun/Dec	595.4		594.9
2.70% Senior Notes ^{(2) (4)}	$	500.0	May 2017	May 2022	May/Nov	496.8		495.9
3.50% Senior Notes ^{(2) (4)}	$	500.0	May 2017	May 2027	May/Nov	495.6		495.1
4.50% Senior Notes ^{(2) (4)}	$	500.0	May 2017	May 2047	May/Nov	492.9		492.7
2.00% Senior Notes ^{(2) (5)}	$	600.0	Nov 2017	Nov 2019	May/Nov	598.6		596.8
2.25% Senior Notes ^{(2) (5)}	$	700.0	Nov 2017	Nov 2020	May/Nov	696.8		695.0
2.65% Senior Notes ^{(2) (4)}	$	700.0	Nov 2017	Nov 2022	May/Nov	693.9		692.3
3.20% Senior Notes ^{(2) (4)}	$	600.0	Feb 2018	Feb 2023	Feb/Aug	596.0		595.0
3.60% Senior Notes ^{(2) (4)}	$	700.0	Feb 2018	Feb 2028	Feb/Aug	693.8		693.2
4.10% Senior Notes ^{(2) (4)}	$	600.0	Feb 2018	Feb 2048	Feb/Aug	592.0		591.8
Senior Floating Rate Notes ^{(2) (6)}	$	650.0	Oct 2018	Nov 2021	Quarterly	646.8		—
4.40% Senior Notes ^{(2) (4)}	$	500.0	Oct 2018	Nov 2025	May/Nov	495.4		—
4.65% Senior Notes ^{(2) (4)}	$	500.0	Oct 2018	Nov 2028	May/Nov	494.7		—
5.25% Senior Notes ^{(2) (4)}	$	500.0	Oct 2018	Nov 2048	May/Nov	492.9		—
						$	10,816.9	$	8,674.2


⁽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⁾	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.

⁽⁴⁾

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
4.40% Senior Notes due November 2025	Sept 2025	20
4.65% Senior Notes due November 2028	Aug 2028	25
5.25% Senior Notes due November 2048	May 2048	30


⁽⁵⁾	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.

⁽⁶⁾

Interest will accrue for each quarterly interest period at a rate equal to three-month LIBOR plus 0.70% per year as determined on the applicable interest determination date as defined in the indenture. Interest is payable quarterly in February, May, August and November. The notes are not redeemable prior to October 30, 2019. On or after this date, the notes are 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.

For the year ended February 28, 2018, we recognized a loss on extinguishment of debt of $97.0 million. This amount consisted of a make-whole payment of $73.6 million in connection with the early redemption of our April 2012 senior notes and the write-off of debt issuance costs of $23.4 million primarily in connection with the prior-to-maturity repayments of term loan facilities under our applicable senior credit facility in May and November 2017.

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 $45.1 million and $503.5 million as of February 28, 2019, and February 28, 2018, respectively. As of February 28, 2019, and February 28, 2018, amounts outstanding under these arrangements were $28.9 million and $277.0 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 (see “Other long-term debt” for additional information). 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, 2019, we recorded a conversion of $248.2 million from long-term debt to noncontrolling equity interests associated with the noncash settlement of a prior contractual agreement with our glass production plant joint venture partner, Owens-Illinois. During the year ended February 28, 2017, we had recorded a noncash conversion of $132.0 million from noncontrolling equity interests to long-term debt associated with the same contractual agreement. As of February 28, 2018, outstanding borrowings under this contractual agreement were $230.5 million and were included in our consolidated balance sheet in accordance with our consolidation of this variable interest entity.

Debt payments –

As of February 28, 2019, the required principal repayments under long-term debt obligations (excluding unamortized debt issuance costs and unamortized discounts of $69.6 million and $15.5 million, respectively) for each of the five succeeding fiscal years and thereafter are as follows:



(in millions)
2020	$	1,067.4
2021	764.3
2022	1,710.3
2023	1,856.8
2024	1,842.5
Thereafter	5,668.8
	$	12,910.1

Accounts receivable securitization facilities –

As of February 28, 2018, we had two outstanding 364-day revolving trade accounts receivable securitization facilities with aggregate borrowings outstanding of $391.9 million at a weighted average interest rate of 2.4%. Both facilities reached full maturation in accordance with the respective terms for each facility during the year ended February 28, 2019, and were not renewed.