Bank of China contributes $18.75 million USD to the $300 million USD Term Loan A tranche of a $1.225 billion USD syndicated loan to PHINA to support its spin-off from BorgWarner

Project narrative

On July 3, 2023, a syndicate of nine banks — including the New York Branch of the Bank of China (BOC) — entered into a $1,225,000,000.00 USD syndicated credit agreement with PHINA Inc. — a Delaware-incorporated company manufacturing premium fuel systems, electrical systems, and aftermarket parts for the automotive sector headquartered in Auburn Hills, Michigan and listed on the New York Stock Exchange that was established as a spin-off of BorgWarner Inc's fuel systems and aftermarket business — to support its spin-off from BorgWarner. This facility was divided into three tranches: a $500,000,000.00 USD revolving credit facility (RCF) tranche; a $300,000,000.00 USD term loan A facility tranche; and a $425,000,000.00 USD term loan B facility. This facility carried a maturity period of five years and a final maturity date of July 3, 2028, though the RCF tranche and Term Loan A tranche would mature 91 calendar days prior to the scheduled maturity of the Term Loan B tranche or any refinancing or replacement thereof in an aggregate principal amount exceeding $100 million USD that was secured pari passu with the RCF and the Term Loan A and maturing on or prior to July 3, 2028. The facility was available for drawdown in U.S. dollars, British pounds sterling, or euros. Borrowings under this facility carried a variable interest rate based on either a base rate (only for U.S. dollar-denominated loans, the highest of Bank of America's prime rate; the federal funds effective rate plus 0.5%; one-month adjusted Term SOFR (SOFR + 0.10%) plus 1.00%; or 1.00%m plus a rate for the RCF tranche and the Term Loan A tranche, ranging from 1.50% to 2.00% depending on the borrower's or 3.00% for Term Loan B tranche) or adjusted Term SOFR for U.S. dollar-denominated loans, EURIBOR for euro-denominated loans, or adjusted SONIA (SONIA plus 0.0326%) for British pound sterling-denominated loans plus a margin dependent on the borrower's total net leverage ratio ranging from 3.00% if greater than or less than 2.00 to 1.00 to 2.50% if less than 1.00 to 1.00 for the RCF and Term Loan A tranches, while the margin was 4.00% for the Term Loan B tranche. The commitment fee was payable quarterly based on the actual daily amount of the available RCF commitment and was based on the borrower's total net leverage ratio, ranging from 0.30% if greater than or equal to 2.00 to 1.00 to 0.20% if less than 1.00 to 1.00. At signing, the pricing level for margin and commitment fee setting was equal to less than 1.00 to 1.00, so the margin for Term SOFR, EURIBOR, and SONIA was 2.50% (SOFR plus 2.60%), the base rate was 1.50%, and the commitment fee was 0.20%. The credit agreement and obligations under it were secured by (i.e. collateralized against) substantially all of the personal property and that of certain of the direct or indirect domestic subsidiaries of PHINA. BorgWarner Propulsion Systems LLC and BorgWarner PDS (Anderson), L.L.C. — Delaware-incorporated subsidiaries of PHINA — were required to issue guarantees for the credit agreement are required to guarantee the credit agreement and obligations under it. The credit agreement contained customary covenants for the borrower's investments, dispositions of assets, indebtedness, liens on assets, and dividends and other distributions. The revolving tranche and Term Loan A tranche featured financial covenants requiring the consolidated net leverage ratio of the borrower, determined at the end of each fiscal quarter, to not exceed 3.00 to 1.00 (or, at the borrower's election and subject to certain conditions, 3.50 to 1.00 for the period in which such election is made and the next succeeding testing period and, thereafter, 3.25 to 1.00 for the next two succeeding testing periods) and the consolidated interest coverage ratio of the borrower, determined at the end of each fiscal quarter, to be at least 3.00 to 1.00. The proceeds of the RCF tranche were to be used by the borrower in order pay make a special payment to BorgWarner Inc. in order to allow PHINA Inc. to spin-off of it (which BorgWarner would then use to make a distribution to all the shareholders of its common stock, and thus complete the spin-off) and pay related fees and expenses of that and the credit agreement and then thereafter to be used for working capital and general corporate purposes of newly-independent PHINA. The proceeds of the Term Loan A and Term Loan B tranches were to be used by the borrower only to finance the special payment and related fees and expenses. The spin-off was completed on July 3, 2023. BOC committed $31,250,000.00 USD to the $500 million USD RCF tranche, as captured by Record ID#107476. In addition to BOC, the following lenders contributed to the $500 million USD RCF tranche: Bank of America, N.A. ($77,187,500.00 USD), JPMorgan Chase Bank, N.A. ($77,187,500.00 USD), PNC Bank, National Association ($75,000,000.00 USD), Wells Fargo Bank, National Association ($75,000,000.00 USD), U.S. Bank National Association ($75,000,000.00 USD), the New York Branch of Deutsche Bank AG ($43,750,000.00 USD), Citibank, N.A. ($28,125,000.00 USD), and The Northern Trust Company ($17,500,000.00 USD). BOC committed $18,750,000.00 USD to the $300 million USD Term Loan A tranche, as captured by Record ID#107477. In addition to BOC, the following lenders contributed to the $300 million USD Term Loan A tranche: Bank of America ($42,812,500.00 USD), JPMorgan Chase Bank ($42,812,500.00 USD), PNC Bank ($45,000,000.00 USD), Wells Fargo Bank ($45,000,000.00 USD), U.S. Bank ($45,000,000.00 USD), the New York Branch of Deutsche Bank ($26,250,000.00 USD), Citibank, N.A. ($16,875,000.00 USD), and The Northern Trust Company ($17,500,000.00 USD). The $425 million USD Term Loan B tranche was provided solely by JPMorgan Chase Bank. Six banks, Bank of America ($8,333,333.34 USD) and JPMorgan Chase Bank, PNC Bank, Wells Fargo, U.S. Bank, and the New York Branch of Deutsche Bank ($8,333,333.33 USD each) provided the $50 million USD letter of credit commitment. Bank of America served as administrative agent and swingline lender. JPMorgan Chase Bank, N.A. served as the syndication agent. PNC Bank, Wells Fargo Bank, U.S. Bank, and Deutsche Bank Securities Inc. served as co-documentation agents. BofA Securities, Inc., JPMorgan Chase Bank, PNC Capital Markets LLC, Wells Fargo Securities, LLC, U.S. Bank, and Deutsche Bank Securities served as joint lead arrangers and joint bookrunners for the RCF tranche and the Term Loan A tranche. JPMorgan Chase Bank, BofA Securities, PNC Capital Markets, Wells Fargo Securities, U.S. Bank, and Deutsche Bank Securities served as joint lead arrangers and joint bookrunners for the Term Loan B tranche. As of July 3, 2023, $75 million USD was outstanding under the RCF tranche, $300 million USD was outstanding under the Term Loan A tranche, and $425 million USD was outstanding under the Term Loan B tranche, totaling an $800 million USD aggregate principal outstanding under the credit agreement. On April 4, 2024, the lending syndicate — still including BOC — entered into an amendment agreement with the borrower for the facility; the amendment removed the mandatory prepayment based on quarterly and annual operating cash flow calculations and increased the total net leverage ratio required to be satisfied under the borrower's financial covenant from 3.00:1.00 to 3.25:1.00 (subject to a step-up to 3.75:1.00 in connection with a qualifying acquisition for the fiscal quarter when such qualifying acquisition is consummated and the following three fiscal quarters).