What is the purpose of these new credit facilities?

The new credit facilities provide Automatic Data Processing, Inc. (ADP) with financial flexibility for general corporate purposes. The establishment of these updated and increased credit lines suggests a proactive approach to managing liquidity and ensuring access to funding.

How do the new credit facilities compare to the previous ones?

The new facilities represent an increase in total borrowing capacity and an update to the maturity profiles. The $2.75 billion 364-Day Facility replaces a $2.25 billion facility, and the $2.25 billion Five-Year Facility (expandable to $2.75 billion) replaces a $2.00 billion facility. This indicates an overall expansion and modernization of ADP's credit arrangements.

What are the key features of the borrowing options available?

The facilities offer two main borrowing options: a competitive advance option, which utilizes an auction mechanism to determine interest rates, and a revolving credit option, providing committed funds at floating rates based on LIBOR or prime rate margins. Both options allow for reborrowing of repaid amounts, subject to availability.

Are there any specific financial covenants or restrictions mentioned?

Yes, the facilities include customary covenants that restrict the company and its subsidiaries from 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 that could lead to acceleration of loans.

ADP 8-K: Material Agreements & Financial Events

Summary

Automatic Data Processing, Inc. (ADP) announced on June 18, 2015, the execution of two new credit agreements totaling $5.0 billion, replacing its previous credit facilities. The new arrangements consist of a $2.75 billion 364-Day Credit Agreement and a $2.25 billion Five-Year Credit Agreement, with the latter having an accordion feature allowing for an additional $500 million. These facilities provide ADP with enhanced financial flexibility through competitive advance and revolving credit options, with interest rates tied to LIBOR or prime rates, and commitment fees based on unused portions and issuer ratings. The company also confirmed that an existing $3.25 billion five-year credit agreement from 2014 remains in effect, suggesting a robust and diversified approach to its liquidity management.

Key Highlights

1ADP entered into new credit facilities totaling $5.0 billion, comprising a $2.75 billion 364-Day Facility and a $2.25 billion Five-Year Facility.
2The Five-Year Facility includes an accordion feature that could increase its capacity by $500 million to $2.75 billion.
3These new facilities replace prior credit agreements of $2.25 billion (364-day) and $2.00 billion (five-year), which were terminated.
4Borrowing options include a competitive advance facility via an auction mechanism and a committed revolving credit facility.
5Interest rates for revolving loans are based on LIBOR or prime rate margins, with competitive advance rates determined by auction.
6Commitment fees apply to unused portions, with the Five-Year Facility's fee dependent on ADP's issuer rating.
7The company also maintains an existing $3.25 billion five-year credit agreement entered into in June 2014.

AUTOMATIC DATA PROCESSING INC 8-K Report, Material Agreement (Jun 19, 2015)

Summary

Key Highlights

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