Item 1.01
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Entry Into a Material Definitive Agreement.
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On May 12, 2021, BorgWarner Inc. (“BorgWarner” or the “Company”) executed an Underwriting Agreement, dated May 12, 2021, between the Company, Deutsche Bank AG, London Branch, Merrill Lynch International and J.P. Morgan Securities plc, each acting on behalf of itself and the several underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to sell, and subject to the terms set forth therein, the Underwriters agreed to buy €1.0 billion aggregate principal amount of its 1.00% Senior Notes due 2031 (the “Notes”).
The Notes are governed by an indenture, dated September 23, 1999, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Base Indenture”), as supplemented by an Eighth Supplemental Indenture, that will be dated as of the date of the original issuance of the Notes (the “Eighth Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between the Company and Deutsche Bank Trust Company Americas, as trustee for the Notes. Pursuant to the Indenture, interest on the Notes will accrue at a rate of 1.00% per annum on the principal amount from May 19, 2021, payable annually in arrears on May 19 each year, beginning on May 19, 2022. The Notes will mature on May 19, 2031, unless redeemed prior thereto.
The Company may redeem the Notes at its option at any time, in whole or from time to time in part. If the redemption occurs at any time prior to February 19, 2031 (the “Par Call Date”), then the redemption price will equal the sum of 100% of the principal amount of the Notes being redeemed plus unpaid interest, if any, accrued on the Notes to, but excluding, the redemption date and the make-whole amount as defined in the Indenture. If the Company redeems the Notes on or after the Par Call Date, the redemption price will equal 100% of the principal amount of the Notes being redeemed plus unpaid interest, if any, accrued thereon to, but excluding, the redemption date.
If a change of control repurchase event (as defined in the Indenture) occurs with respect to the Notes, unless the Company has exercised its right to redeem the Notes, the Company will make an offer to each holder of the Notes to repurchase all or any part (in minimum denominations of €100,000 and any integral multiples of €1,000 in excess thereof) of that holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount of such Notes repurchased plus unpaid interest, if any, accrued thereon to, but excluding, the repurchase date.
The Company may redeem all, but not less than all, of the Notes in the event of certain changes in the tax law of the United States (or any taxing authority thereof or therein), which would obligate the Company to pay additional amounts, at a redemption price equal to 100% of the principal amount of the Notes plus unpaid interest, if any, accrued thereon to, but excluding, the redemption date.
The Notes will be the Company’s general unsecured and unsubordinated obligations and will rank equally in right of payment with all of its other existing and future unsecured and unsubordinated obligations. The Notes will be effectively subordinated to any of the Company’s existing or future secured debt to the extent of the value of the assets securing such debt and will be structurally subordinated to all existing and future liabilities and any preferred equity of the Company’s subsidiaries.
The Indenture includes customary events of default, including, among other things, payment default, covenant default, certain defaults under other indebtedness of the Company or certain of its subsidiaries and bankruptcy, insolvency or reorganization affecting the Company or certain of its subsidiaries.
This description of the Indenture is a summary and is qualified in its entirety by reference to the full text of the Base Indenture and the full text of the Eighth Supplemental Indenture. A copy of the Base Indenture is filed as Exhibit 4.1, and the Company will file with the Securities and Exchange Commission as an exhibit to a Current Report on Form 8-K the Eighth Supplemental Indenture after the completion of the offering of the Notes.
The Company intends to use the net proceeds from the sale of the Notes to redeem all €500 million in aggregate principal amount of its outstanding 1.80% Senior Notes due 2022, which are scheduled to mature in November, 2022. Any remaining proceeds will be used for general corporate purposes, including financing a portion of its previously announced acquisition of AKASOL AG (“AKASOL”).