Summary
Cummins Inc. (CMI) filed an 8-K on August 24, 2018, to report the entry into new material definitive agreements concerning its credit facilities. The company has established a new $2.0 billion 5-year revolving credit facility maturing in August 2023, replacing a prior $1.75 billion agreement. Additionally, a new $1.5 billion 364-day credit facility has been put in place, superseding a previous $1.0 billion agreement that was set to expire in September 2018. These new credit agreements are unsecured and are backed by a company guarantee on subsidiary borrowings. They offer flexibility, including options to increase borrowing capacity under certain conditions and a potential to convert revolving loans to term loans under the 364-day facility. The covenants include a financial requirement to maintain a total debt to consolidated total capital ratio not exceeding 0.65:1. This strategic move enhances Cummins' financial flexibility and strengthens its ability to manage its liquidity.
Key Highlights
- 1Cummins Inc. entered into a new $2.0 billion, 5-year revolving credit facility maturing August 22, 2023.
- 2A new $1.5 billion, 364-day credit facility was also established, with commitments terminating August 21, 2019.
- 3Both new credit agreements replace prior agreements, increasing the total available credit capacity.
- 4The new credit facilities are unsecured and require a company guarantee for subsidiary borrowings.
- 5The company has the option to increase borrowing limits under both agreements, subject to certain conditions.
- 6A 'Term-Out Option' allows conversion of revolving loans under the 364-day agreement to term loans.
- 7A key financial covenant requires the total debt to consolidated total capital ratio to not exceed 0.65:1.