01—Abstract
Summary
Summary of the 8-K filed August 18, 2021. Cited figures are marked; the original filing is the authoritative source.
Cummins Inc. (CMI) announced on August 18, 2021, that it has entered into two new credit agreements, superseding prior arrangements.
The first is a five-year revolving credit facility totaling $2.0 billiona, maturing on August 18, 2026. The second is a 364-day revolving credit facility of up to $1.5 billion, with a commitment termination date of August 17, 2022. These agreements provide Cummins with significant liquidity and flexibility, with options for incremental borrowing and conversion of revolving loans to term loans under the 364-day facility.
02—Key points
Key Highlights
- Cummins entered into a new $2.0 billion, 5-year credit agreement maturing in August 2026.
- A new $1.5 billion, 364-day credit agreement has been established, maturing in August 2022.
- The new credit facilities are unsecured, meaning no specific company assets are pledged as collateral.
- The company retains the option to request up to $750 million in incremental loans/availability under the 364-day agreement and up to $1.0 billion under the 5-year agreement, subject to conditions.
- A 'Term-Out Option' allows conversion of outstanding revolving loans under the 364-day facility into term loans maturing one year after the commitment termination date, with a 0.5% fee.
- Interest rates will vary based on loan type and benchmark rates (e.g., prime rate, Adjusted LIBO Rate, Adjusted EURIBO Rate, Daily Simple RFR), with an 'Applicable Rate' based on credit ratings.
- The agreements include customary covenants, with a key financial covenant requiring the ratio of consolidated net debt to consolidated total capital not to exceed 0.65:1.
03—Questions
Frequently Asked Questions
What is the total amount of new credit capacity established by Cummins?
Cummins has established a total credit capacity of up to $3.5 billion through two new agreements: a $2.0 billion five-year credit agreement and a $1.5 billion 364-day credit agreement. The company also has options to increase availability further.
Are these new credit facilities secured?
No, the borrowings under both the 5-year and 364-day credit agreements will not be secured with liens on any of Cummins' or its subsidiaries' assets.
What is the 'Term-Out Option' and why is it significant?
The 'Term-Out Option' allows Cummins to convert outstanding revolving loans under the 364-day facility into term loans that mature one year after the 364-day facility's commitment termination date. This provides flexibility to manage its debt maturity profile, especially if market conditions are favorable for longer-term borrowing at that time. A fee of 0.5% applies to this conversion.
What financial covenant must Cummins adhere to under these agreements?
Cummins must maintain a financial covenant requiring that the ratio of consolidated net debt to consolidated total capital of the company and its subsidiaries does not exceed 0.65:1 as of the last day of each fiscal quarter.
04—Continue