Summary
Autodesk, Inc. (ADSK) filed an 8-K on April 28, 2017, reporting a material amendment to its existing Credit Agreement. The primary focus of this amendment is a modification of its financial covenants. Specifically, the company has replaced the maximum debt to capitalization ratio with a maximum debt to total cash ratio, with varying thresholds throughout fiscal 2017 to fiscal 2019. This change indicates a potential shift in how Autodesk manages and reports its leverage. Furthermore, the amendment temporarily suspends the minimum interest coverage ratio requirement for several fiscal quarters in 2017 and early 2018, before reintroducing it with gradually increasing thresholds. A new fixed charge coverage ratio covenant has also been introduced, effective from April 30, 2017, to April 30, 2018. These adjustments suggest a proactive approach by Autodesk to manage its liquidity and financial flexibility during a transitional period, likely to accommodate its business strategies or operational changes.
Key Highlights
- 1Autodesk amended its Credit Agreement on April 26, 2017, with a group of major banks.
- 2The amendment replaces the 'debt to capitalization ratio' covenant with a 'debt to total cash ratio'.
- 3The debt to total cash ratio will have tiered limits, starting at 2.00:1.00 and increasing to 2.60:1.00 for specific periods.
- 4The minimum interest coverage ratio requirement is waived for several fiscal quarters through early 2018.
- 5A new 'fixed charge coverage ratio' covenant has been added, requiring it to be greater than 1.00:1.00 from April 30, 2017, to April 30, 2018.
- 6These covenant changes provide Autodesk with increased financial flexibility and modify how its leverage and coverage are measured.
- 7The amendment involves Citibank, U.S. Bank, Bank of America, JPMorgan Chase, Wells Fargo, Morgan Stanley, and Bank of Tokyo-Mitsubishi UFJ.