Summary
Automatic Data Processing, Inc. (ADP) announced on June 24, 2011, the execution of two new credit agreements, a $2 billion 364-day facility and a $3.25 billion four-year facility. These new credit lines replace existing facilities and collectively offer a significant borrowing capacity for the company's general corporate purposes. The four-year facility includes an accordion feature allowing for an additional $500 million increase, bringing its potential size to $3.75 billion.
Key Highlights
- 1ADP entered into a $2 billion 364-day credit facility and a $3.25 billion four-year credit facility.
- 2The new facilities replace the company's prior $2.5 billion 364-day and $2.25 billion five-year facilities.
- 3The four-year facility has an accordion feature allowing for an increase of up to $500 million.
- 4Borrowings can be made through competitive advance or revolving credit options.
- 5Interest rates are tied to market benchmarks like LIBOR and the Alternate Base Rate, with pricing influenced by the Markit CDX North American Investment Grade Index and the company's credit ratings.
- 6The company will pay commitment fees on unused portions of the facilities.
- 7The facilities include customary covenants and events of default, similar to those in the replaced agreements.
Frequently Asked Questions
The company has secured a $2 billion 364-day facility and a $3.25 billion four-year facility, totaling $5.25 billion in immediate borrowing capacity. The four-year facility also has an accordion feature that could increase its total commitment to $3.75 billion.
The new credit facilities are available for ADP's general corporate purposes. This provides the company with financial flexibility for various operational needs.
Interest rates are determined by a combination of factors, including a base rate (such as LIBOR or Alternate Base Rate), a facility-specific applicable rate, and in some cases, a Canadian Base Rate. The applicable rates are influenced by the company's credit ratings and market indices like the Markit CDX North American Investment Grade Index.
Yes, ADP will pay a commitment fee on the aggregate unused commitments under both facilities. Additionally, a term-out fee of 0.75% applies to any loans outstanding under the 364-day facility after June 20, 2012.