Summary
Cisco Systems, Inc. (CSCO) filed a Form 8-K on March 31, 2017, to report on two significant financial events. The company entered into a $2 billion, 364-day unsecured revolving credit facility with Bank of America, N.A., and other lenders. This facility is intended for general corporate purposes and working capital, with an option to convert outstanding loans into a term loan maturing one year after the initial termination date. Additionally, Cisco significantly expanded its commercial paper program capacity from $3 billion to $10 billion.
Key Highlights
- 1Cisco secured a new $2 billion, 364-day unsecured revolving credit facility.
- 2The credit facility has an option to be converted into a term loan.
- 3The facility is for general corporate purposes and working capital.
- 4Cisco's commercial paper program capacity was increased from $3 billion to $10 billion.
- 5The new credit agreement includes customary covenants, such as maintaining an EBITDA to interest expense ratio of at least 3.00 to 1.00.
- 6The credit agreement has a termination date of March 29, 2018.
Frequently Asked Questions
The $2 billion credit facility is intended for Cisco's working capital and general corporate purposes. This provides the company with financial flexibility for its ongoing business operations and potential strategic initiatives.
The increase in commercial paper program capacity from $3 billion to $10 billion signifies Cisco's strengthened ability to access short-term funding efficiently and at potentially favorable rates. This larger capacity allows for greater flexibility in managing short-term liquidity needs.
Yes, the credit agreement includes customary covenants. Notably, Cisco is required to maintain a ratio of consolidated EBITDA to consolidated interest expense of not less than 3.00 to 1.00. There are also limitations on incurring liens, secured indebtedness, and indebtedness by subsidiaries.
The 364-day credit facility is scheduled to expire on March 29, 2018. However, Cisco has an option to convert any outstanding loans into a term loan maturing no later than the first anniversary of the termination date, with proper notice and fee payment.