8-KMaterial AgreementsFinancial EventsExhibits & Filings

AUTOMATIC DATA PROCESSING INC 8-K Report, Material Agreement (Jun 30, 2006)

Filed June 30, 2006For Securities:ADP

Summary

Automatic Data Processing, Inc. (ADP) announced on June 28, 2006, the establishment of new credit facilities totaling $4 billion, replacing its previous credit lines. These new facilities include a $1.75 billion 364-day credit agreement and a $2.25 billion five-year credit agreement, with the latter having an accordion feature allowing for an increase to $2.75 billion. These credit lines are designed to provide ADP with significant financial flexibility for its general corporate purposes. The terms of these new facilities are largely consistent with those they replaced, featuring customary covenants and events of default. The introduction of these credit lines indicates ADP's proactive approach to managing its capital structure and ensuring access to liquidity. Investors can view this as a positive sign of financial stability and management's commitment to operational continuity and strategic initiatives.

Key Highlights

  • 1ADP secured new credit facilities totaling $4 billion: a $1.75 billion 364-day facility and a $2.25 billion five-year facility.
  • 2The five-year facility includes an accordion feature, allowing for potential expansion up to $2.75 billion.
  • 3These new facilities replace ADP's prior credit lines, which expired on June 28, 2006.
  • 4Borrowings will be available through a competitive advance option (auction mechanism) and a committed revolving credit option.
  • 5Interest rates for borrowings vary based on borrowing option, loan type (LIBOR or base rate), and credit ratings for the five-year facility.
  • 6Standard covenants restricting liens, sale-leaseback transactions, and asset transfers are included.
  • 7JPMorgan Chase Bank, N.A. and Bank of America, N.A. serve as Administrative Agent and Syndication Agent, respectively.
  • 8Proceeds from these facilities are intended for general corporate purposes.

Frequently Asked Questions

ADP has established new credit facilities totaling $4 billion, comprised of a $1.75 billion 364-day credit agreement and a $2.25 billion five-year credit agreement.

The primary purpose of these credit facilities is to provide ADP with financial flexibility for its general corporate purposes. This could include funding operations, strategic initiatives, or other business needs.

Interest rates vary depending on the borrowing option and the type of loan. For the 364-day facility, rates are based on LIBOR or an alternative base rate, with a potential increase if commitments are extended. For the five-year facility, rates are tied to LIBOR or an alternative base rate, with a spread that is determined by ADP's credit ratings from Standard & Poor's and Moody's.

The commitments under the 364-day facility expire on June 27, 2007, with borrowings maturing on that date or optionally extended to June 27, 2008. The commitments and borrowings under the five-year facility mature on June 28, 2011.