8-KMaterial AgreementsFinancial EventsExhibits & Filings

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

Filed August 19, 2022For Securities:CMI

Summary

Cummins Inc. (CMI) filed an 8-K on August 19, 2022, detailing significant updates to its credit facilities. The company entered into new credit agreements that consolidate and enhance its borrowing capacity, primarily a Fourth Amended and Restated 364-Day Credit Agreement for up to $1.5 billion and an Incremental 364-Day Credit Agreement for an additional $500 million, both expiring on August 16, 2023. These agreements replace previous credit facilities and include provisions for potential further increases and a "Term-Out Option" to convert revolving loans into term loans. Furthermore, Cummins amended its existing 5-Year Credit Agreement to transition from LIBOR to SOFR as the primary interest rate benchmark, reflecting industry-wide shifts. The new credit facilities are unsecured, with Cummins providing guarantees for subsidiary borrowings. The covenants include a financial metric requiring the ratio of consolidated net debt to consolidated total capital to not exceed 0.65:1. This proactive management of its credit structure provides financial flexibility and aligns with current market practices.

Key Highlights

  • 1Entered into new credit agreements totaling up to $2.0 billion in revolving and swingline loans, with a commitment termination date of August 16, 2023.
  • 2Amended existing 5-Year Credit Agreement to replace LIBOR with SOFR as the interest rate benchmark.
  • 3New credit facilities are unsecured, with Cummins guaranteeing subsidiary borrowings.
  • 4Option to request up to an additional $750 million in borrowing capacity under the 364-Day Credit Agreement, subject to certain conditions.
  • 5Introduced a 'Term-Out Option' allowing conversion of revolving loans into term loans maturing one year after the commitment termination date.
  • 6Maintained a financial covenant requiring consolidated net debt to consolidated total capital ratio not to exceed 0.65:1.
  • 7Current interest rates are based on Alternate Base Rate, Adjusted Term SOFR Rate, Adjusted EURIBO Rate, Adjusted Daily Simple RFR, or other agreed-upon rates, with applicable rates tiered based on credit ratings.

Frequently Asked Questions

The company has entered into new credit agreements that provide for revolving and swingline loans up to an aggregate of $2.0 billion ( $1.5 billion under the 364-Day Credit Agreement and $500 million under the Incremental 364-Day Credit Agreement).

The commitment termination date for both the 364-Day Credit Agreement and the Incremental Credit Agreement is August 16, 2023.

Yes, Cummins has amended its Amended and Restated Credit Agreement to replace the LIBOR benchmark with SOFR (Secured Overnight Financing Rate) as the primary interest rate benchmark for its credit facilities.

No, the borrowings under the new credit agreements will not be secured with liens on any of the Company's or its subsidiaries' assets. Cummins will, however, guarantee all borrowings by its subsidiary borrowers under these agreements.