8-KMaterial AgreementsFinancial EventsExhibits & Filings

CISCO SYSTEMS, INC. 8-K Report, Material Agreement (May 14, 2021)

Filed May 14, 2021For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) has entered into a Second Amended and Restated Credit Agreement, effective May 13, 2021. This agreement establishes a five-year, $3.0 billion unsecured revolving credit facility with a syndicate of lenders led by Bank of America, N.A. The facility includes provisions for increasing the borrowing capacity up to $5.0 billion and extending the maturity date. A key feature is the incorporation of sustainability-linked mechanics, where interest rates and commitment fees can be adjusted based on Cisco's performance against specific social impact and foam reduction targets. This updated credit facility provides Cisco with significant financial flexibility and reinforces its commitment to environmental and social governance (ESG) initiatives. The inclusion of sustainability metrics in its financing demonstrates a strategic alignment between financial health and corporate responsibility, which could be viewed favorably by investors focused on long-term value and ESG performance.

Key Highlights

  • 1Cisco secured a $3.0 billion unsecured revolving credit facility with a five-year term.
  • 2The facility has flexibility to increase total borrowing capacity up to $5.0 billion.
  • 3The maturity date can be extended by up to an additional year, twice.
  • 4Interest rates and commitment fees are linked to Cisco's senior debt credit ratings.
  • 5Sustainability-linked mechanics are incorporated, adjusting costs based on achieving social impact and foam reduction targets.
  • 6The agreement includes customary covenants, such as maintaining a minimum consolidated EBITDA to interest expense ratio of 3.0 to 1.0.
  • 7Bank of America, N.A. serves as the administration agent and a key lender.

Frequently Asked Questions

The primary purpose of this Second Amended and Restated Credit Agreement is to provide Cisco Systems with a significant, flexible, and unsecured revolving credit facility of $3.0 billion for general corporate purposes. It also incorporates sustainability-linked features, aligning financing costs with the company's ESG performance.

The interest rate and commitment fee payable by Cisco are subject to adjustment based on whether the company meets specific targets related to two key performance indicators: Social Impact and Foam Reduction. Achieving these targets could lead to lower borrowing costs, while failing to meet them could result in higher costs.

An unsecured credit facility means that Cisco is not required to pledge specific assets as collateral. This generally indicates strong creditworthiness and financial flexibility, as it doesn't tie up company assets for this particular debt.

Yes, the agreement requires Cisco to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of not less than 3.0 to 1.0. This covenant ensures that Cisco maintains sufficient earnings to cover its interest obligations.