Summary
Broadcom Inc. (AVGO) has entered into a significant Credit Agreement, dated August 15, 2023, establishing up to $28.39 billion in unsecured term loan facilities. This financing is specifically earmarked to fund the pending acquisition of VMware, Inc. The agreement comprises three distinct unsecured term facilities: Term A-2 ($10.695 billion), Term A-3 ($10.695 billion), and Term A-5 ($7 billion), with provisions for an additional $2 billion "Term Loan Increase." These facilities mature at different points, ranging from two to five years after the "Funding Date," which is contingent upon the consummation of the VMware acquisition. This move signifies a critical step in Broadcom's strategy to acquire VMware, with the debt financing structured to support the transaction's closing. Notably, the company has also terminated a previously arranged $32 billion senior unsecured bridge facility, indicating a shift in its financing strategy for this acquisition. While the Credit Agreement includes customary covenants, a key financial covenant requires Broadcom to maintain a Consolidated Interest Coverage Ratio of not less than 2.00:1.00, starting from the first full quarter after the Funding Date.
Key Highlights
- 1Broadcom secured a new $28.39 billion unsecured credit facility to finance the acquisition of VMware.
- 2The credit facility includes three tranches: Term A-2 ($10.695B), Term A-3 ($10.695B), and Term A-5 ($7B), with maturities of 2, 3, and 5 years post-funding, respectively.
- 3There is an option to increase the term loan commitments by up to an additional $2 billion.
- 4The new credit agreement replaces a previously announced $32 billion bridge facility, signaling a change in Broadcom's financing strategy for the VMware acquisition.
- 5The debt is unsecured and not guaranteed by Broadcom's subsidiaries.
- 6A key financial covenant requires Broadcom to maintain a minimum Consolidated Interest Coverage Ratio of 2.00:1.00.