8-KMaterial AgreementsExhibits & Filings

CMS ENERGY CORP 8-K Report, Material Agreement (Dec 15, 2022)

Filed December 15, 2022For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation (CMS) and its subsidiary Consumers Energy Company have entered into material definitive agreements to amend and restate their respective revolving credit facilities. These actions are important for investors as they ensure continued access to liquidity and reflect updated financial market practices. The amendments extend the maturity dates and provide for new borrowing limits, demonstrating the companies' commitment to maintaining a strong financial footing. The primary focus of these amendments is the transition to the Secured Overnight Financing Rate (SOFR) as the benchmark interest rate, replacing the London Interbank Offered Rate (LIBOR). This shift aligns the facilities with industry-wide changes and enhances predictability in interest rate calculations. The increased credit facility for Consumers Energy also provides greater financial flexibility for its operations and investments.

Key Highlights

  • 1CMS Energy amended and restated its $550 million unsecured revolving credit facility, extending its maturity to December 14, 2027, with two one-year extension options.
  • 2Consumers Energy amended and restated its secured revolving credit facility, increasing the total amount to $1.1 billion from $850 million, with a maturity date of December 14, 2027, and two one-year extension options.
  • 3Both amended credit facilities replace previous facilities with substantially similar terms that were set to expire in 2024.
  • 4The amendments transition the interest rate benchmark for both facilities from LIBOR to the SOFR Rate (Secured Overnight Financing Rate).
  • 5The Consumers Energy facility now includes an additional $250 million secured by a new supplemental indenture, increasing its secured borrowing capacity.
  • 6Funds drawn under both facilities are designated for general corporate purposes and working capital, ensuring operational flexibility.
  • 7The new credit agreements were executed on December 14, 2022, and involve a consortium of major banks.

Frequently Asked Questions

Amending and restating the credit facilities ensures the companies have continued access to a significant pool of funds for their operational needs and future investments. It also extends the availability of these funds to 2027, providing longer-term financial stability and replacing older agreements that were nearing expiration.

The transition from LIBOR to SOFR is a global industry shift as LIBOR is being phased out. SOFR is a more forward-looking and robust benchmark rate based on actual overnight repurchase agreement transactions, aligning the companies with current market standards and regulatory expectations.

The increase in Consumers Energy's credit facility from $850 million to $1.1 billion provides the company with greater financial flexibility. This enhanced capacity can be used to support capital expenditures, manage working capital needs, and pursue strategic initiatives, particularly as it relates to its infrastructure and service operations.

The CMS Energy facility remains unsecured. The Consumers Energy facility is secured by first mortgage bonds, and the increase in the facility amount includes additional borrowings that are also secured by first mortgage bonds issued under a new supplemental indenture.