8-KMaterial AgreementsFinancial EventsExhibits & Filings

CISCO SYSTEMS, INC. 8-K Report, Material Agreement (Feb 21, 2006)

Filed February 21, 2006For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) filed a Form 8-K on February 21, 2006, to announce the entry into a material definitive agreement concerning a significant underwritten public offering of investment grade notes. This offering, expected to close on February 22, 2006, aims to raise substantial capital through three series of notes: $500 million in Floating Rate Notes due 2009, $3 billion in 5.25% Senior Notes due 2011, and $3 billion in 5.50% Senior Notes due 2016. These notes are unsecured and will rank equally with existing senior unsecured indebtedness, but junior to subsidiary liabilities. The company is establishing an Indenture with Deutsche Bank Trust Company Americas as trustee, outlining covenants related to liens, sale and lease-back transactions, and asset disposals. The agreement also details customary events of default, including payment failures, breaches of covenants, and bankruptcy provisions. The substantial debt issuance indicates Cisco's strategic financial management, potentially for general corporate purposes, acquisitions, or to bolster its capital structure.

Key Highlights

  • 1Cisco Systems entered into an underwriting agreement for a public offering of investment grade notes on February 14, 2006.
  • 2The offering includes $500 million in Floating Rate Notes due 2009, $3 billion in 5.25% Senior Notes due 2011, and $3 billion in 5.50% Senior Notes due 2016.
  • 3The total principal amount of notes to be issued is $6.5 billion.
  • 4The notes are unsecured and will rank equally with other senior unsecured indebtedness, but junior to subsidiary obligations.
  • 5Key underwriters include Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Morgan Stanley & Co. Incorporated.
  • 6Deutsche Bank Trust Company Americas is acting as the trustee for the new debt issuance.
  • 7The issuance includes provisions for redemption with a 'make-whole premium' for the 2011 and 2016 notes.

Frequently Asked Questions

Cisco Systems is issuing a total of $6.5 billion in debt through three series of notes: $500 million in Floating Rate Notes due 2009, $3 billion in 5.25% Senior Notes due 2011, and $3 billion in 5.50% Senior Notes due 2016.

The Floating Rate Notes due 2009 will mature on February 20, 2009, with interest at three-month LIBOR plus 0.08%, payable quarterly. The 5.25% Senior Notes due 2011 will mature on February 22, 2011, with fixed semi-annual interest payments. The 5.50% Senior Notes due 2016 will mature on February 22, 2016, also with fixed semi-annual interest payments. The 2011 and 2016 notes are redeemable at Cisco's option with a 'make-whole premium'.

The new notes are unsecured and will rank equally with Cisco's existing and future senior unsecured indebtedness. However, they will effectively rank junior to all liabilities of Cisco's subsidiaries.

The Indenture includes covenants limiting liens, sale and lease-back transactions, and asset disposals. Customary events of default are specified, including failure to pay principal or interest, breach of covenants after notice, and bankruptcy or insolvency events. Certain defaults can lead to the acceleration of the principal and interest due.