Summary
Caterpillar Inc. (CAT) filed an 8-K report on May 26, 2011, detailing a significant material definitive agreement to issue and sell a substantial aggregate principal amount of Senior Notes totaling $4.25 billion. These notes are comprised of floating rate notes maturing in 2012 and 2013, and fixed-rate senior notes maturing in 2014, 2021, and 2041. The primary purpose of this debt issuance is to fund a portion of the cash consideration required for Caterpillar's pending acquisition of Bucyrus International, Inc. This debt issuance represents a strategic move by Caterpillar to finance a major acquisition, indicating confidence in its future cash flows and strategic direction. Investors should note the specific terms of the notes, including interest rates, maturity dates, and the unique mandatory redemption provision tied to the successful completion of the Bucyrus acquisition. The unsecured nature of the notes and their equal ranking with other senior indebtedness are also key considerations.
Key Highlights
- 1Caterpillar Inc. entered into an Underwriting Agreement to issue $4.25 billion in Senior Notes.
- 2The Notes include both Floating Rate Senior Notes (due 2012 and 2013) and fixed-rate Senior Notes (due 2014, 2021, and 2041).
- 3Proceeds from the note issuance are designated to fund a portion of the cash consideration for the pending acquisition of Bucyrus International, Inc.
- 4The notes are unsecured and rank equally with other senior indebtedness of Caterpillar.
- 5A special mandatory redemption clause exists: if the Bucyrus acquisition does not close by June 30, 2012, or if the merger agreement is terminated, all notes will be redeemed at 101% of principal plus accrued interest.
- 6The issuance was made under Caterpillar's effective shelf registration statement on Form S-3.
- 7The sale of the Notes was expected to close on May 27, 2011, subject to customary closing conditions.