Summary
On June 24, 2009, Automatic Data Processing, Inc. (ADP) announced the execution of a new $2.25 billion 364-Day Credit Agreement. This new facility replaces a similar expiring credit line and maintains ADP's access to significant short-term liquidity. The agreement provides for two borrowing options: a competitive advance option via an auction mechanism and a committed revolving credit option, both allowing for reborrowing of repaid amounts. This demonstrates the company's proactive approach to managing its working capital needs and ensuring financial flexibility during potentially uncertain economic times.
Key Highlights
- 1ADP entered into a new $2.25 billion 364-Day Credit Agreement, replacing an expiring facility of the same size.
- 2The new credit facility provides access to short-term funding, crucial for managing working capital and operational needs.
- 3Two borrowing options are available: a competitive advance facility through an auction and a committed revolving credit facility.
- 4The facility has an expiration date of June 23, 2010, with a potential extension for borrowings to June 23, 2011, at ADP's option.
- 5Interest rates are variable, tied to LIBOR or a base rate, with an 'Applicable Rate' influenced by the Markit CDX North American Investment Grade Index.
- 6The agreement includes customary covenants and events of default, similar to the previous facility, aimed at protecting lenders while allowing operational flexibility for ADP.
- 7Borrowings under the facility are intended for general corporate purposes.
Frequently Asked Questions
The new $2.25 billion 364-Day Credit Agreement is primarily intended to provide Automatic Data Processing, Inc. (ADP) with access to short-term liquidity for general corporate purposes. It replaces a similar expiring credit facility, ensuring the company maintains financial flexibility.
The facility offers two borrowing options: a competitive advance option utilizing an auction mechanism and a committed revolving credit option. Both allow for the reborrowing of repaid amounts, subject to availability. The agreement has a maturity of June 23, 2010, with a potential one-year extension at ADP's discretion.
Interest rates are variable. For revolving loans, they can be based on a LIBOR rate or a prime/federal funds/LIBOR-based rate, all subject to an 'Applicable Rate'. The Applicable Rate is linked to the Markit CDX North American Investment Grade Index, with minimum percentages set for different periods.
The agreement contains standard covenants that restrict ADP and its subsidiaries from certain actions like creating liens or entering into sale-leaseback transactions. It also includes typical events of default, such as failure to pay other material debt or bankruptcy. These are designed to protect lenders while generally aligning with ADP's established financial practices.