Summary
Cummins Inc. (CMI) has entered into a new 364-day credit agreement providing up to $1.0 billion in revolving and swingline loans, maturing on September 4, 2018. This unsecured facility offers financial flexibility, allowing for potential increases in borrowing capacity by an additional $500 million under certain conditions and the option to convert revolving loans into term loans. The agreement is part of the company's ongoing financial strategy, supplementing its existing credit facilities.
Key Highlights
- 1Entered into a 364-day credit agreement for up to $1.0 billion in revolving and swingline loans.
- 2The new credit facility is unsecured.
- 3The agreement matures on September 4, 2018.
- 4Potential to increase borrowing capacity by up to $500 million.
- 5Option to convert revolving loans into term loans maturing one year after the commitment termination date.
- 6Borrowings will bear interest based on various benchmarks including prime rate, federal funds rate, overnight bank funding rate, or Adjusted LIBO Rate, with margins dependent on credit ratings.
- 7The company's current senior unsecured long-term debt ratings are A2 (Moody's) and A+ (S&P).
Frequently Asked Questions
The primary purpose of this new credit agreement is to provide Cummins Inc. with a flexible, unsecured source of revolving and swingline loans totaling up to $1.0 billion. This facility is designed to support the company's ongoing liquidity needs and financial flexibility for a 364-day period.
No, the New Credit Agreement explicitly states that borrowings will not be secured with liens on any of the Company’s or its subsidiaries’ assets. This makes it an unsecured credit facility.
Borrowers can choose from several interest rate options: a prime rate-based option (for USD loans), a federal funds rate/overnight bank funding rate plus spread, or the Adjusted LIBO Rate plus a spread that varies (0.50% to 1.00%) based on Cummins' credit rating. Swingline loans have a rate agreed upon by the lender and borrower.
Yes, Cummins has the option to increase the maximum availability under the New Credit Agreement by up to $500 million, provided certain conditions are met, including the absence of any default and the consent of participating Lenders.