Blizzard 2015 Annual Report Download - page 41

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We may redeem the 2021 Notes on or after September 15, 2016 and the 2023 Notes on or after September 15, 2018, in whole or in
part on any one or more occasions, at specified redemption prices, plus accrued and unpaid interest. At any time prior to
September 15, 2016, with respect to the 2021 Notes, and at any time prior to September 15, 2018, with respect to the 2023 Notes, we
may also redeem some or all of the Notes by paying a “make-whole premium”, plus accrued and unpaid interest. In addition, upon the
occurrence of one or more qualified equity offerings, we may also redeem up to 35% of the aggregate principal amount of each of the
2021 Notes and 2023 Notes outstanding with the net cash proceeds from such offerings. The Notes are repayable, in whole or in part
and at the option of the holders, upon the occurrence of a change in control and a ratings downgrade, at a purchase price equal to
101% of principal, plus accrued and unpaid interest.
On October 11, 2013, in connection and simultaneously with the Purchase Transaction, we entered into a credit agreement (the “Credit
Agreement”) for a $2.5 billion secured term loan facility maturing in October 2020 (the “Term Loan”), and a $250 million secured
revolving credit facility (the “Revolver” and, together with the Term Loan, the “Credit Facilities”). A portion of the Revolver can be
used to issue letters of credit of up to $50 million, subject to the availability of the Revolver. To date, we have not drawn on the
Revolver.
As of December 31, 2015, the outstanding balance of our Term Loan was $1.9 billion. Borrowings under the Term Loan and Revolver
bear interest at an annual rate equal to an applicable margin plus, at our option, (A) a base rate determined by reference to the highest
of (a) the interest rate in effect determined by the administrative agent as its “prime rate,” (b) the federal funds rate plus 0.5%, and
(c) the London InterBank Offered Rate (“LIBOR”) for an interest period of one month plus 1.00%, or (B) LIBOR. Further, LIBOR
borrowings under the Term Loan will be subject to a LIBOR floor of 0.75%. At December 31, 2015, the Term Loan bore interest at
3.25%. In certain circumstances, our interest rate under the Credit Facilities will increase.
In addition to paying interest on outstanding principal balances under the Credit Facilities, we are required to pay the lenders a
commitment fee on unused commitments under the Revolver. We are also required to pay customary letter of credit fees and agency
fees.
The Credit Agreement required quarterly principal repayments of 0.25% of the Term Loan’s original principal amount, with the
balance due on the maturity date. On February 11, 2014, we made a voluntary principal repayment of $375 million on our Term Loan.
This repayment satisfied the required quarterly principal repayments for the entire term of the Credit Agreement. On February 11,
2015, we made an additional voluntary principal repayment, this time in the amount of $250 million, which reduced the balance due
on the maturity date. The 2015 repayment reduced the Term Loan’s outstanding principal balance to $1.9 billion and based on this
reduced balance, we expect our contractual interest payments in the future will be reduced by approximately $8 million annually,
based on the interest rate of 3.25% at December 31, 2015. Amounts borrowed under the Term Loan and repaid may not be
re-borrowed.
Agreements governing our indebtedness, including the indenture governing the Notes and the Credit Agreement, impose operating and
financial restrictions on our activities under certain conditions. These restrictions require us to comply with or maintain certain
financial tests and ratios. In addition, the indenture and the Credit Agreement limit or prohibit our ability to, among other things: incur
additional debt or make additional guarantees; pay distributions or dividends and repurchase stock; make other restricted payments,
including without limitation, certain restricted investments; create liens; enter into agreements that restrict dividends from subsidiaries;
engage in transactions with affiliates; and enter into mergers, consolidations or sales of substantially all of our assets.
In addition, if, in the future, we borrow under the Revolver, as described in Note 11 of the Notes to Consolidated Financial Statements
included in this Annual Report, we may be required, during certain periods where outstanding revolving loans exceed a certain
threshold, to maintain a maximum senior secured net leverage ratio calculated pursuant to a financial maintenance covenant under the
Credit Agreement.
The Company was in compliance with the terms of the Notes and Credit Facilities as of December 31, 2015.
Amendments to Credit Agreement
Tranche A Term Loan In conjunction with the King Acquisition, the Company entered into three Amendments to the Credit
Agreement (the “Amendments”). The Amendments, among other things, provide for incremental term loans in the form of Tranche A
Term Loans in an aggregate principal amount of approximately $2.3 billion, the proceeds of which were to be issued upon successful
closing to fund the King Acquisition.
On February 23, 2016, we successfully completed the King Acquisition and the Tranche A Term Loans funded. The Tranche A Term
Loans are scheduled to mature on October 11, 2020 and bear interest, at the Company’s option, at either (a) a base rate equal to the
highest of (i) the federal funds rate, plus 0.5%, (ii) the prime commercial lending rate of Bank of America, N.A. and (iii) the LIBOR
for an interest period of one month beginning on such day plus 1.00%, or (b) LIBOR, in each case, plus an applicable interest margin.
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