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, 2015

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS:

Borrowings consist of the following:



	February 28, 2015						February 28, 2014
	Current		Long-term		Total		Total
(in millions)
Notes payable to banks
Senior Credit Facility – Revolving Credit Loans	$	—	$	—	$	—	$	—
Other	52.4		—		52.4		57.2
	$	52.4	$	—	$	52.4	$	57.2
Long-term debt
Senior Credit Facility – Term Loans	$	139.2	$	2,652.9	$	2,792.1	$	2,864.8
Senior Notes	—		4,348.6		4,348.6		4,047.3
Other	18.9		136.0		154.9		51.2
	$	158.1	$	7,137.5	$	7,295.6	$	6,963.3

Senior credit facility –

In connection with the Beer Business Acquisition, on May 2, 2013 , the Company, CIH International S.à r.l., an indirect wholly-owned subsidiary of ours (“CIH” and together with the Company, the “Borrowers”), and Bank of America, N.A., as administrative agent (the “Administrative Agent”), and certain other lenders entered into a Restatement Agreement (the “2013 Restatement Agreement”) that amended and restated our then existing senior credit facility (as amended and restated by the 2013 Restatement Agreement, the “2013 Credit Agreement”). The 2013 Restatement Agreement was entered into to arrange a portion of the debt to finance the Beer Business Acquisition.

On May 28, 2014, the Company, CIH, the Administrative Agent, and certain other lenders entered into a Restatement Agreement (the “2014 Restatement Agreement”) that amended and restated the 2013 Credit Agreement (as amended and restated by the 2014 Restatement Agreement, the “May 2014 Credit Agreement”). The principal change to the 2013 Credit Agreement effected by the May 2014 Credit Agreement was the conversion of the pre-existing $850.0 million revolving credit facility into two tranches, a $425.0 million U.S. revolving credit facility (the “U.S. Revolving Credit Facility”) and a $425.0 million European revolving credit facility (the “European Revolving Credit Facility”). We are the borrower under the U.S. Revolving Credit Facility and we and/or CIH are the borrowers under the European Revolving Credit Facility.

On August 20, 2014, the Company, CIH, the Administrative Agent, and certain other lenders (all such parties other than either of the Borrowers are collectively referred to as the “Lenders”) entered into Amendment No. 1 (the “Amendment”) to the May 2014 Credit Agreement (as amended, the “ 2014 Credit Agreement”). The Amendment was entered into primarily to reduce the interest rate applicable to the then existing European Term B loan facility under the May 2014 Credit Agreement by removing the provisions imposing certain minimums, or floors, used in the calculation of the interest rate on the European Term B loan facility. This was accomplished by adding a new European Term B-1 tranche to the 2014 Credit Agreement which replaced the existing European Term B loan facility.

The 2014 Credit Agreement provides for aggregate credit facilities of $3,712.3 million, consisting of the following:



	Amount		Maturity
(in millions)
Revolving Credit Facility ⁽¹⁾⁽²⁾	$	850.0	June 7, 2018
U.S. Term A Facility ⁽¹⁾	496.3		June 7, 2018
U.S. Term A-1 Facility ⁽¹⁾	245.0		June 7, 2019
U.S. Term A-2 Facility ⁽¹⁾	649.7		June 7, 2018
European Term A Facility ⁽¹⁾	481.3		June 7, 2018
European Term B-1 Facility ⁽¹⁾	990.0		June 7, 2020
	$	3,712.3


⁽¹⁾	Contractual interest rate varies based on our debt ratio (as defined in the 2014 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 the $425.0 million U.S. Revolving Credit Facility and the $425.0 million European Revolving Credit Facility. Includes two sub-facilities for letters of credit of up to $200.0 million in the aggregate.

The 2014 Credit Agreement also permits us to elect to increase the revolving credit commitments under the U.S. Revolving Credit Facility or add one or more tranches of additional term loans, subject to the willingness of existing or new lenders to fund such increase or term loans and other customary conditions. The minimum aggregate principal amount of such incremental revolving credit commitment increases or additional term loans may be no less than $25.0 million and the maximum aggregate principal amount of all such incremental revolving credit commitment increases and additional term loans, other than term loans the proceeds of which are applied to repay existing term loans, may be no more than $750.0 million. A portion of the borrowings under the 2013 Credit Agreement were used to refinance the outstanding obligations under our then existing senior credit facility with the remainder used to finance a portion of the purchase price for the Beer Business Acquisition and related expenses.

The U.S. obligations under the 2014 Credit Agreement are guaranteed by certain of our U.S. subsidiaries. These obligations are also secured by a pledge of (i) 100% of the ownership interests in certain of our U.S. subsidiaries and (ii) 65% of the ownership interests in certain of our foreign subsidiaries. The European obligations under the 2014 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 CIH’s 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.

We and our subsidiaries are subject to covenants that are contained in the 2014 Credit Agreement, including those restricting the incurrence of additional indebtedness (including guarantees of indebtedness), additional liens, mergers and consolidations, the payment of dividends, the making of certain investments, prepayments of certain debt, transactions with affiliates, agreements that restrict our non-guarantor subsidiaries from paying dividends, and dispositions of property, 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 debt coverage ratio.

As of February 28, 2015, information with respect to borrowings under the 2014 Credit Agreement is as follows:



	Revolving Credit Facility			U.S. Term A Facility			U.S. Term A-1 Facility			U.S. Term A-2 Facility			European Term A Facility			European Term B-1 Facility
(in millions)
Outstanding borrowings	$	—		$	476.9		$	243.2		$	624.4		$	462.5		$	985.1

Interest rate	—		%	1.9		%	2.2		%	2.0		%	2.0		%	2.0		%

Libor margin	1.75		%	1.75		%	2.0		%	1.75		%	1.75		%	1.75		%

Outstanding letters of credit	$	14.4

Remaining borrowing capacity	$	835.6

As of February 28, 2015, the required principal repayments of the term loans under the 2014 Credit Agreement for each of the five succeeding fiscal years and thereafter are as follows:



	U.S. Term A Facility		U.S. Term A-1 Facility		U.S. Term A-2 Facility		European Term A Facility		European Term B-1 Facility		Total
(in millions)
2016	$	38.7	$	2.5	$	50.6	$	37.5	$	9.9	$	139.2
2017	51.5		2.5		67.5		50.0		9.9		181.4
2018	51.5		2.5		67.5		50.0		9.9		181.4
2019	335.2		2.4		438.8		325.0		9.9		1,111.3
2020	—		233.3		—		—		9.9		243.2
Thereafter	—		—		—		—		935.6		935.6
	$	476.9	$	243.2	$	624.4	$	462.5	$	985.1	$	2,792.1

In April 2012, we transitioned our then existing interest rate swap agreement to a one-month LIBOR base rate versus the existing three-month LIBOR base rate by entering into a new interest rate swap agreement which was designated as a cash flow hedge for $500.0 million of our floating LIBOR rate debt. In addition, our existing interest rate swap agreement was dedesignated as a hedge. We also entered into an additional interest rate swap agreement for $500.0 million that was not designated as a hedge to offset the prospective impact of the newly undesignated interest rate swap agreement. As a result of these hedges, we have 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. The losses in AOCI related to the dedesignated interest rate swap agreement are being reclassified from AOCI ratably into earnings in the same period in which the original hedged item is being recorded in our results of operations. For the years ended February 28, 2015, February 28, 2014, and February 28, 2013, we reclassified net losses of $8.3 million, $8.2 million and $8.0 million, net of income tax effect, respectively, from AOCI to interest expense.

Senior notes –

Our outstanding senior notes are as follows:



	Date of					Outstanding Balance ⁽¹⁾
	Issuance	Maturity	Interest Payments	Principal		February 28, 2015		February 28, 2014
(in millions)
7.25% Senior Notes ⁽²⁾	August 2006	September 2016	Mar/Sep	$	700.0	$	698.6	$	697.8
7.25% Senior Notes ⁽²⁾⁽³⁾	January 2008	May 2017	May/Nov	$	700.0	$	700.0	$	700.0
8.375% Senior Notes ⁽²⁾	December 2007	December 2014	Jun/Dec	$	500.0	$	—	$	499.5
6% Senior Notes ⁽²⁾	April 2012	May 2022	May/Nov	$	600.0	$	600.0	$	600.0
3.75% Senior Notes ⁽²⁾	May 2013	May 2021	May/Nov	$	500.0	$	500.0	$	500.0
4.25% Senior Notes ⁽²⁾	May 2013	May 2023	May/Nov	$	1,050.0	$	1,050.0	$	1,050.0
3.875% Senior Notes ⁽²⁾	November 2014	November 2019	May/Nov	$	400.0	$	400.0	$	—
4.75% Senior Notes ⁽²⁾	November 2014	November 2024	May/Nov	$	400.0	$	400.0	$	—


⁽¹⁾	Amounts are net of 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. 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 a make whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 50 basis points.


⁽³⁾	Issued in exchange for notes originally issued in May 2007.

In August 2012, we issued $650.0 million aggregate principal amount of 4.625% Senior Notes due March 2023. We intended to use the net proceeds from the offering to fund a portion of the original agreement we signed in June 2012 to acquire the remaining 50% equity interest in Crown Imports. Because of the differences between the terms relating to a February 2013 amendment of the original agreement and the original agreement, we effected special mandatory redemption provisions and redeemed the August 2012 senior notes in February 2013.

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 –

We have additional credit arrangements totaling $483.4 million and $373.9 million as of February 28, 2015, and February 28, 2014, respectively. As of February 28, 2015, and February 28, 2014, amounts outstanding under these arrangements were $207.3 million and $89.2 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. Interest rates and other terms of these borrowings vary from country to country, depending on local market conditions.

Debt payments –

As of February 28, 2015, the required principal repayments under long-term debt obligations (excluding unamortized discount of $1.4 million) for each of the five succeeding fiscal years and thereafter are as follows:



(in millions)
2016	$	158.1
2017	897.8
2018	893.1
2019	1,117.9
2020	744.5
Thereafter	3,485.6
	$	7,297.0

Accounts receivable securitization facilities –

On October 1, 2013, we entered into an amended and restated 364-day revolving trade accounts receivable securitization facility (the “2013 CBI Facility”). Under the 2013 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. Such receivables have been pledged by the CBI SPV to secure borrowings under the 2013 CBI Facility. We service the receivables for the 2013 CBI Facility. The receivable balances related to the 2013 CBI Facility are reported as accounts receivable on our balance sheets, but the receivables are at all times owned by the CBI SPV and are included on our financial statements as required by generally accepted accounting principles. On September 29, 2014, we and the CBI SPV amended the 2013 CBI Facility resulting in the extension of the CBI Facility for an additional 364-day term (the “CBI Facility”). Under the CBI Facility, there are two lenders, one holding 60% of the aggregate facility and the other holding 40% of the aggregate facility. Any borrowings under the CBI 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 85 basis points and (ii) 40% of the borrowings are charged at one-month LIBOR plus a margin of 85 basis points. The CBI Facility provides borrowing capacity of $190.0 million up to $290.0 million structured to account for the seasonality of our business, subject to further limitations based upon various pre-agreed formulas.

Also, on October 1, 2013, Crown Imports entered into a 364-day revolving trade accounts receivable securitization facility (the “2013 Crown Facility”). Under the 2013 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. Such receivables have been pledged by the Crown SPV to secure borrowings under the 2013 Crown Facility. Crown Imports services the receivables for the 2013 Crown Facility. The receivable balances related to the 2013 Crown Facility are reported as accounts receivable on our balance sheets, but the receivables are at all times owned by the Crown SPV and are included on our financial statements to comply with generally accepted accounting principles. On September 29, 2014, Crown Imports and the Crown SPV amended the 2013 Crown Facility resulting in the extension of the Crown Facility for an additional 364-day term (the “Crown Facility”). Under the Crown Facility, there are two lenders, one holding 60% of the aggregate facility and the other holding 40% of the aggregate facility. Any borrowings under 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 85 basis points and (ii) 40% of the borrowings are charged at one-month LIBOR plus a margin of 85 basis points. The Crown Facility provides borrowing capacity of $100.0 million up to $160.0 million to account for the seasonality of Crown Imports’ business.

As of February 28, 2015, our accounts receivable securitization facilities are as follows:



	Outstanding Borrowings		Weighted Average Interest Rate		Remaining Borrowing Capacity
(in millions)
CBI Facility	$	—	—	%	$	275.0
Crown Facility	$	—	—	%	$	100.0

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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