Summary
Automatic Data Processing, Inc. (ADP) announced on June 24, 2010, the entry into new credit facilities designed to replace its existing credit lines. The company secured a $2.5 billion 364-Day Credit Agreement and a $1.5 billion Three-Year Credit Agreement, with an accordion feature allowing the latter to expand to $2.0 billion. These new facilities offer increased flexibility and potentially more favorable terms compared to the previous arrangements, which were terminated on the same day. The new credit agreements provide ADP with significant liquidity and strategic financial flexibility. The competitive advance and revolving credit options cater to different borrowing needs, while the interest rate structure, tied to market indices like the Markit CDX North American Investment Grade Index and LIBOR, allows for cost optimization based on market conditions and ADP's credit rating. The commitment and term-out fees are standard for such arrangements. The overall structure aims to ensure efficient access to capital for general corporate purposes.
Key Highlights
- 1ADP has established new credit facilities totaling $4.0 billion ($2.5B 364-day and $1.5B 3-year).
- 2The Three-Year Facility includes an accordion feature, potentially increasing its size by $500 million to $2.0 billion.
- 3These new facilities replace previous credit lines totaling $2.25 billion (364-day) and $1.5 billion (5-year), which were terminated concurrently.
- 4Borrowing options include a competitive advance mechanism (auction-based) and a committed revolving credit option.
- 5Interest rates are variable and linked to market benchmarks like LIBOR and the Markit CDX North American Investment Grade Index, reflecting ADP's creditworthiness.
- 6Standard covenants and events of default are included, consistent with typical credit agreements.
- 7Funds borrowed under these facilities are intended for general corporate purposes.