Summary
Cisco Systems, Inc. (CSCO) has filed an 8-K report on August 17, 2007, detailing the entry into a significant new credit facility. The company secured a $3 billion unsecured revolving credit facility, which can be expanded up to $5 billion and extended in maturity under certain conditions. This facility provides Cisco with substantial financial flexibility and liquidity for general corporate purposes. This credit agreement, set to expire in August 2012 (with potential extensions), is structured with variable interest rates tied to credit ratings and market conditions. The covenants within the agreement are standard, including limitations on subsidiary indebtedness and a financial maintenance covenant requiring a minimum EBITDA to interest expense ratio. The establishment of this facility demonstrates Cisco's proactive approach to managing its capital structure and ensuring access to funding.
Key Highlights
- 1Cisco entered into a $3 billion unsecured revolving credit facility expiring August 17, 2012.
- 2The facility has an accordion feature allowing for potential increases up to $5 billion.
- 3Maturity date of the facility can be extended up to August 15, 2014, subject to agreement.
- 4Interest rates are variable, based on Federal Funds rate, prime rate, or LIBOR plus a margin dependent on credit ratings.
- 5A commitment fee is payable annually, varying with Cisco's credit ratings.
- 6The agreement includes customary covenants, such as limitations on liens, secured debt, and subsidiary indebtedness.
- 7A key financial covenant requires Cisco to maintain a consolidated EBITDA to consolidated interest expense ratio of at least 3.00 to 1.00.