What is the total amount of credit available to ADP under these new agreements?

Under the new agreements, ADP has access to a total of $4 billion in credit. This is comprised of a $2 billion 364-Day Credit Agreement and a $2 billion Amended and Restated Five-Year Credit Agreement. Additionally, the Five-Year Facility has an accordion feature that allows for an increase of up to $500 million, potentially raising the total commitment to $2.5 billion under that specific facility.

What are the implications of these new credit facilities for ADP's financial flexibility?

These new credit facilities enhance ADP's financial flexibility by providing access to a substantial pool of liquidity for general corporate purposes. The combination of a short-term 364-day facility and a longer-term five-year facility, along with flexible borrowing options like competitive advances and revolving credit, allows ADP to manage its funding needs efficiently and potentially optimize borrowing costs based on market conditions.

How do the interest rates and fees for these new facilities compare to the previous ones?

The filing indicates that interest rates are determined by facility-specific applicable rates (linked to the Markit CDX North American Investment Grade Index) plus either a LIBOR-based rate or the Alternate Base Rate. The applicable rates vary based on issuer ratings for the five-year facility. Commitment fees on unused portions are also charged, with rates varying by facility and, for the five-year facility, by issuer rating. A term-out fee of 0.75% applies to loans outstanding under the 364-day facility after June 18, 2014. While the specific rates and fees are detailed within the credit agreements, the structure suggests a focus on market-based pricing and flexibility.

Are there any significant covenants or restrictions associated with these new credit agreements?

Yes, the facilities contain customary covenants that restrict the company and its borrowing subsidiaries. These typically include limitations on creating liens, entering into sale and leaseback transactions, and engaging in consolidations, mergers, or transfers of substantially all assets. There are also customary events of default, such as failure to make payments, breach of covenants, and insolvency events, which could allow lenders to accelerate the loans.

ADP 8-K: Material Agreements & Financial Events

Summary

Automatic Data Processing, Inc. (ADP) announced on June 19, 2013, the execution of two new credit facilities totaling $4 billion. This includes a $2 billion 364-day facility and an amended and restated $2 billion five-year facility. The five-year facility also includes an accordion feature allowing for an increase of up to $500 million. These new facilities replace previous credit agreements and are intended to provide ADP with flexible borrowing options for general corporate purposes. Investors should note that these credit agreements demonstrate ADP's proactive approach to managing its liquidity and financial flexibility. The structure of the facilities, with both short-term and longer-term options and competitive advance mechanisms, suggests a strategy to optimize borrowing costs. The presence of major financial institutions as lenders and agents underscores the company's strong relationships within the banking sector.

Key Highlights

1ADP entered into two new credit facilities on June 19, 2013: a $2 billion 364-Day Credit Agreement and an Amended and Restated $2 billion Five-Year Credit Agreement.
2The Five-Year Facility includes an accordion feature that allows for an increase in commitments by up to $500 million, potentially bringing the total to $2.5 billion.
3These new facilities replace ADP's prior $2 billion 364-day facility and $1.5 billion five-year facility, both of which were terminated on the same day.
4The company's existing $3.25 billion four-year facility, established in June 2011, remains in effect.
5Borrowing options include a competitive advance mechanism (via auction) and a committed revolving credit option, offering flexibility in accessing funds.
6Interest rates are based on a combination of facility-specific applicable rates tied to the Markit CDX North American Investment Grade Index and either LIBOR or the Alternate Base Rate.
7The new facilities are backed by a strong syndicate of major financial institutions, with JPMorgan Chase Bank, N.A. serving as Administrative Agent.

AUTOMATIC DATA PROCESSING INC 8-K Report, Material Agreement (Jun 20, 2013)

Summary

Key Highlights

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