| Item 1.01 |
Entry into a Material Definitive Agreement. |
In anticipation of the upcoming maturity of its $400 million aggregate principal amount of 3.500% senior notes due in October (the “2026 Notes”), on April 6, 2026, Flowers Foods, Inc., a Georgia corporation (the “Company”), entered into a $400.0 million senior unsecured delayed draw term loan credit facility (the “2026 Term Loan Facility”), which provides the Company with a prepayable financing structure. To provide enhanced financial flexibility, on April 6, 2026, the Company also amended its Revolving Credit Facility (as defined below) to extend its Covenant Holiday (as defined therein), currently in effect, through and including the Company’s fiscal quarter ended October 9, 2027, along with other provisions intended to align the Revolving Credit Facility to the terms of the 2026 Term Loan Facility.
2026 Term Loan Credit Agreement
On April 6, 2026, the Company entered into the 2026 Term Loan Facility pursuant to a Term Loan Credit Agreement (the “2026 Term Loan Credit Agreement”), dated as of April 6, 2026, with certain financial institutions party thereto as lenders and Wells Fargo Bank, National Association, as administrative agent. The 2026 Term Loan Credit Agreement requires that the Company use the net proceeds of the 2026 Term Loan Facility to, together with cash on hand, finance the repayment in full of the 2026 Notes and to pay the fees, costs and expenses incurred in connection therewith and with the execution of the 2026 Term Loan Facility and the Revolver Amendment (as defined below).
The 2026 Term Loan Facility may be made available in a single drawing during the period from the closing date of the 2026 Term Loan Facility through and including October 1, 2026, or the earlier termination of the commitments. The 2026 Term Loan Facility has an initial maturity date occurring on the third anniversary of the funding date thereof.
Borrowings under the 2026 Term Loan Facility bear interest, at the option of the Company, based on the Secured Overnight Financing Rate (“SOFR”) or the “base rate”, in each case, plus an applicable margin. The applicable margin is determined by reference to a pricing grid set forth in the 2026 Term Loan Credit Agreement based on the Company’s leverage and debt rating, ranging from a maximum of 2.000% in the case of SOFR-based loans and 1.000% in the case of base rate loans to a minimum of 0.875% in the case of SOFR-based loans and 0.00% in the case of base rate loans, based upon the Company’s then applicable leverage ratio and debt rating. In addition, the 2026 Term Loan Facility bears an additional ticking fee on the full amount of the unused commitments, also determined by reference to the pricing grid, and ranging from a maximum of 0.250% to a minimum of 0.060%, based upon the Company’s then applicable leverage ratio and debt rating.
The 2026 Term Loan Credit Agreement contains representations, covenants and events of default that are customary for financing transactions of this nature. Events of default in the 2026 Term Loan Credit Agreement include, among others: (a) the failure to pay when due the obligations owing thereunder; (b) the failure to perform (and not timely remedy, if applicable) certain covenants; (c) certain defaults and accelerations under other indebtedness; (d) the occurrence of bankruptcy or insolvency events; (e) certain judgments against the Company or any of its subsidiaries; (f) any representation, warranty or statement made thereunder or under the ancillary loan documents and certain certificates being subsequently proven to be untrue in any material respect; and (g) the occurrence of a Change in Control (as defined in the 2026 Term Loan Credit Agreement). Upon the occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the 2026 Term Loan Credit Agreement and the ancillary loan documents.
The 2026 Term Loan Credit Agreement contains financial covenants testing the Company’s Leverage Ratio and Interest Coverage Ratio (each as defined in the 2026 Term Loan Credit Agreement). The maximum Leverage Ratio financial covenant requires that the Company maintain a Leverage Ratio of no greater than 3.75:1.00 on the last day of any fiscal quarter of the Company; provided that, at the Company’s option, such Leverage Ratio may be increased to 4.00:1.00 for any period of up to four consecutive fiscal quarters following an acquisition or investment, subject to certain conditions (any such increase, a “Covenant Holiday”); provided, further, that a Covenant Holiday is in effect from the closing date of the 2026 Term Loan Facility through and including the Company’s fiscal quarter ending October 9, 2027. The minimum Interest Coverage Ratio financial covenant requires that the Company maintain an Interest Coverage Ratio of no less than 4.50:1.00 on the last day of any fiscal quarter of the Company.
