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

Quarterly report pursuant to Section 13 or 15(d)

Borrowings

Borrowings

6 Months Ended

Aug. 31, 2016

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS:

Borrowings consist of the following:



	August 31, 2016						February 29, 2016
	Current		Long-term		Total		Total
(in millions)
Notes payable to banks
Senior Credit Facility – Revolving Credit Loans	$	—	$	—	$	—	$	92.0
Other	114.3		—		114.3		316.3
	$	114.3	$	—	$	114.3	$	408.3

Long-term debt
Senior Credit Facility – Term Loans	$	172.5	$	3,305.9	$	3,478.4	$	2,856.8
Senior Notes	699.4		3,320.5		4,019.9		4,716.3
Other	21.2		395.2		416.4		99.8
	$	893.1	$	7,021.6	$	7,914.7	$	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 “2016 Restatement Agreement”) that amended and restated our prior senior credit facility (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 $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 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 CIH’s subsidiaries, (ii) 100% of certain interests in certain of CIHH’s subsidiaries and (iii) 100% of the ownership interests in certain of our U.S. subsidiaries and 65% of the ownership interests in certain of our foreign subsidiaries.

Proceeds from borrowings under the 2016 Credit Agreement were used to refinance outstanding obligations under our prior senior credit facility and short-term borrowings under our accounts receivable securitization facilities, and for other general corporate purposes.

The 2016 Credit Agreement provides for aggregate credit facilities of $4,690.5 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)}	1,223.9		July 16, 2020
U.S. Term A-1 Facility ^{(1) (3)}	240.1		July 16, 2021
European Term A Facility ^{(1) (3)}	1,376.5		July 16, 2020
European Term A-1 Facility ^{(1) (3)}	700.0		March 10, 2021
	$	4,690.5


⁽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 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 loan facility. CIHH is the borrower under the European Term A-1 loan facility.

As of August 31, 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⁾
(in millions)
Outstanding borrowings	$	—		$	1,199.7		$	239.1		$	1,351.5		$	688.1
Interest rate	—		%	2.0		%	2.2		%	2.0		%	2.0		%
Libor margin	1.5		%	1.5		%	1.75		%	1.5		%	1.5		%
Outstanding letters of credit	$	16.8
Remaining borrowing capacity	$	1,133.2


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

As of August 31, 2016, the required principal repayments of the term loans under the 2016 Credit Agreement (excluding unamortized debt issuance costs of $18.9 million) for the remaining six 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		Total
(in millions)
2017	$	31.8	$	1.2	$	35.7	$	17.5	$	86.2
2018	63.6		2.4		71.5		35.0		172.5
2019	63.6		2.4		71.5		35.0		172.5
2020	63.6		2.4		71.5		35.0		172.5
2021	985.4		2.4		1,108.4		35.0		2,131.2
2022	—		228.7		—		533.7		762.4
	$	1,208.0	$	239.5	$	1,358.6	$	691.2	$	3,497.3

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 $250.0 million of additional one-month LIBOR base rate delayed-start interest rate swap agreements effective September 1, 2016, which are designated as cash flow hedges for $250.0 million of our floating LIBOR rate debt. As a result, we have 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.

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 provides 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 varies based on the subsidiary’s consolidated leverage ratio (as defined in the Canadian Credit Agreement) and is a function of a base rate plus a margin. The Canadian Credit Agreement has a maturity of June 21, 2018. Proceeds from borrowings under the Canadian Credit Agreement were used for general corporate purposes. As of August 31, 2016, under the Canadian Credit Agreement, there were outstanding term loan borrowings of C$275.0 million, or $209.8 million (excluding unamortized debt issuance costs of $0.9 million), bearing an interest rate of 2.64%. There were no outstanding revolver borrowings under the Canadian Credit Agreement as of August 31, 2016.

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 August 31, 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 August 31, 2016, amounts outstanding under the contractual agreement were $158.5 million with a weighted average interest rate of 5.7%.

Accounts receivable securitization facilities:

On September 28, 2015, 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 $330.0 million structured to account for the seasonality of our business, subject to further limitations based upon various pre-agreed formulas.

Also, on September 28, 2015, 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 $100.0 million up to $190.0 million structured to account for the seasonality of Crown Imports’ business.

As of August 31, 2016, our accounts receivable securitization facilities are as follows:



	Outstanding Borrowings		Weighted Average Interest Rate		Remaining Borrowing Capacity
(in millions)
CBI Facility	$	—	—	%	$	300.0
Crown Facility	$	70.0	1.5	%	$	105.0

On September 27, 2016, our existing accounts receivable securitization facilities were amended, resulting in the extension of each facility for an additional 364-day term. In addition, the newly amended CBI Facility provides borrowing capacity of $235.0 million up to $340.0 million and the newly amended Crown Facility provides borrowing capacity of $120.0 million up to $210.0 million. The remaining provisions of the amended facilities are substantially identical in all material respects to the prior facilities.