8-KMaterial AgreementsFinancial EventsExhibits & Filings

CUMMINS INC 8-K Report, Material Agreement (Jul 19, 2022)

Filed July 19, 2022For Securities:CMI

Summary

Cummins Inc. (CMI) has filed an 8-K report on July 19, 2022, detailing a significant financing arrangement. On July 13, 2022, the company entered into a Loan Agreement allowing for up to $2.0 billion in delayed-draw term loans. These loans are intended for general corporate purposes, with a specific mention of financing the acquisition of Meritor, Inc. The financing flexibility provided by this agreement is a key takeaway for investors. The loans are unsecured and can be drawn in a single instance before October 13, 2022, maturing three years after funding. The interest rates are tied to Adjusted Term SOFR or a prime rate, with margins that vary based on the company's credit rating. The current applicable rate for the SOFR option, given CMI's credit ratings (A2 from Moody's and A+ from S&P), would be 0.70% over Adjusted Term SOFR. The agreement also includes customary covenants, notably a debt-to-total capital ratio not exceeding 0.65:1.

Key Highlights

  • 1Entry into a Material Definitive Agreement for a $2.0 billion delayed-draw term loan facility.
  • 2Loan proceeds available for general corporate purposes, including the acquisition of Meritor, Inc.
  • 3Unsecured loan facility with availability for a single draw prior to October 13, 2022.
  • 4Loans will mature three years after the funding date.
  • 5Interest rates are based on Adjusted Term SOFR or a prime rate, with margins linked to credit ratings.
  • 6Current applicable rate for the SOFR option is Adjusted Term SOFR + 0.70% based on CMI's credit ratings.
  • 7Agreement includes a financial covenant restricting the consolidated net debt to consolidated total capital ratio to a maximum of 0.65:1.

Frequently Asked Questions

The primary purpose of the $2.0 billion delayed-draw term loan facility is to provide Cummins Inc. with financial flexibility for general corporate purposes, which specifically includes financing the acquisition of Meritor, Inc.

The loans must be drawn in a single instance prior to October 13, 2022. Once funded, the loans will mature on the third anniversary of the date on which they are funded.

Borrowings will bear interest at either Adjusted Term SOFR plus a margin ranging from 0.55% to 0.85% (depending on credit rating), or a prime rate-based option. Based on CMI's current credit ratings, the applicable rate for the SOFR option would be Adjusted Term SOFR plus 0.70%.

Yes, the agreement contains a key financial covenant requiring that the ratio of consolidated net debt to consolidated total capital of Cummins Inc. and its subsidiaries does not exceed 0.65:1 as of the last day of each fiscal quarter. The agreement also includes customary events of default.