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.