8-KMaterial AgreementsFinancial EventsOther Events+1

CARPENTER TECHNOLOGY CORP 8-K Report, Material Agreement (Apr 4, 2017)

Filed April 4, 2017For Securities:CRS

Summary

Carpenter Technology Corporation (CRS) has announced the execution of a new $400 million unsecured revolving credit facility, which can be expanded to $600 million, replacing their previous credit agreement that was set to expire in June 2018. This new facility, effective March 31, 2017, matures on March 31, 2022, and provides enhanced financial flexibility for working capital, general corporate purposes, and debt refinancing. Investors should note the improved terms, including potentially lower interest rates and commitment fees that are now tied to the company's senior unsecured long-term debt rating. While the new facility offers increased borrowing capacity and extended maturity, it also comes with a set of financial and restrictive covenants designed to protect lenders. These include maintaining specific coverage and leverage ratios, and limitations on additional debt, acquisitions, mergers, and asset sales, which are important considerations for assessing the company's operational and strategic freedom.

Key Highlights

  • 1Carpenter Technology Corp. entered into a new $400 million unsecured revolving credit facility, maturing March 31, 2022.
  • 2The facility can be increased to $600 million, providing significant financial flexibility.
  • 3The new credit agreement replaces a previous agreement set to expire in June 2018, extending the maturity by nearly five years.
  • 4Proceeds from the credit facility can be used for working capital, general corporate purposes, and refinancing existing debt.
  • 5Interest rates and commitment fees are variable, based on the company's senior unsecured long-term debt rating.
  • 6The credit facility includes financial covenants, such as a minimum interest coverage ratio of 3.50:1.00 and a maximum debt-to-capital ratio of 55%.
  • 7Restrictive covenants are in place, limiting certain actions like additional indebtedness, acquisitions, and asset disposals, subject to specific exceptions and potential waivers.

Frequently Asked Questions

The new unsecured revolving credit facility is designed to provide Carpenter Technology Corporation with financial flexibility for working capital, general corporate purposes, and to repay or refinance certain existing indebtedness. It replaces a prior agreement with a longer maturity and potentially more favorable terms.

The initial borrowing capacity under the new credit facility is $400,000,000. The company also has the right to request an increase in the commitment amount up to an aggregate of $600,000,000.

Interest rates are variable and based on either a 'Base Rate' or 'Eurocurrency Rate,' with applicable margins influenced by the company's senior unsecured long-term debt rating. A commitment fee on the unused portion of the facility and letter of credit fees also apply, with rates varying based on the debt rating.

Key financial covenants require the maintenance of a minimum interest coverage ratio of 3.50 to 1.00 and a maximum debt-to-capital ratio of 55%. Restrictive covenants limit additional indebtedness, new liens, certain acquisitions and investments, mergers, asset sales, and dividend payments under specific circumstances, though exceptions and waivers may apply.