8-KMaterial AgreementsFinancial EventsExhibits & Filings

CADENCE DESIGN SYSTEMS INC 8-K Report, Material Agreement (Dec 13, 2012)

Filed December 13, 2012For Securities:CDNS

Summary

Cadence Design Systems, Inc. (CDNS) has entered into a new $250 million, five-year senior secured revolving credit facility on December 12, 2012. This facility, with Bank of America, N.A. as the administrative agent, provides the company with significant financial flexibility for working capital, capital expenditures, and potential mergers and acquisitions. The credit facility is secured by certain assets, including accounts receivable and capital stock of subsidiaries, and includes covenants related to debt-to-EBITDA and EBITDA-to-interest coverage ratios, ensuring a level of financial discipline. This strategic move signals Cadence's commitment to maintaining robust liquidity and supporting its growth initiatives. The terms of the credit agreement, including interest rates tied to LIBOR or a base rate plus a margin, along with commitment fees, are standard for this type of financing. Investors should view this as a positive development that strengthens the company's financial foundation and its capacity to pursue strategic opportunities.

Key Highlights

  • 1Cadence entered into a $250 million, five-year senior secured revolving credit facility on December 12, 2012.
  • 2The facility is with Bank of America, N.A., acting as administrative agent, swingline lender, and letter of credit issuer.
  • 3Borrowings can be used for working capital, capital expenditures, mergers and acquisitions, and other lawful purposes.
  • 4The credit facility is secured by accounts receivable, capital stock of domestic subsidiaries, and a portion of the voting capital stock of first-tier foreign subsidiaries.
  • 5Interest rates are based on BBA LIBOR or a fluctuating base rate, plus a margin dependent on Cadence's leverage ratio.
  • 6The agreement includes customary negative covenants and financial covenants, such as maintaining a funded debt to EBITDA ratio not greater than 3:1 and an EBITDA to interest charges ratio of at least 3:1.

Frequently Asked Questions

The primary purpose of this $250 million credit facility is to provide Cadence Design Systems with financial flexibility to fund working capital needs, capital expenditures, and to support potential mergers and acquisitions or other strategic growth initiatives.

The credit facility is secured by a first priority security interest in Cadence's accounts receivable, all of the capital stock of its domestic subsidiaries, and 65% of the voting capital stock (and 100% of the non-voting capital stock) of its first-tier foreign subsidiaries.

Cadence must maintain a funded debt to EBITDA ratio not greater than 3 to 1 (subject to certain exceptions) and an EBITDA to interest charges ratio of at least 3 to 1. These covenants are designed to ensure the company maintains a healthy financial position.

The outstanding loans drawn under the Credit Agreement are payable on or before December 12, 2017, making it a five-year facility.