Summary
Caterpillar Inc. (CAT) announced on April 24, 2020, that it entered into a $3.875 billion unsecured revolving credit facility, referred to as the Short Term Facility, with various financial institutions. This facility, with an expiration date of December 31, 2020, is available for general corporate purposes. As of the filing date, no funds had been drawn under this facility, indicating the company's existing liquidity was sufficient at that time. The Short Term Facility includes specific financial covenants for both Caterpillar Inc. and its subsidiary, Caterpillar Financial Services Corporation (Cat Financial). Caterpillar must maintain a consolidated net worth of at least $9 billion, while Cat Financial must adhere to an interest coverage ratio above 1.15 to 1 and a leverage ratio not exceeding 10.0 to 1. These covenants are designed to ensure the financial health and stability of both entities throughout the term of the credit facility, providing a measure of comfort to investors regarding the company's financial commitments.
Key Highlights
- 1Caterpillar Inc. secured a $3.875 billion unsecured revolving credit facility (Short Term Facility) expiring December 31, 2020.
- 2The facility is intended for general corporate purposes.
- 3As of the filing date, Caterpillar had not drawn any funds from the Short Term Facility.
- 4Key financial covenants are in place for both Caterpillar and Caterpillar Financial Services Corporation.
- 5Caterpillar Inc. must maintain a consolidated net worth of at least $9 billion.
- 6Caterpillar Financial Services Corporation has requirements for interest coverage ratio (above 1.15x) and leverage ratio (not greater than 10.0x).