Summary
Cintas Corporation (CTAS) announced on September 21, 2016, the execution of an Amended and Restated Credit Agreement establishing a new US$600 million revolving credit facility and a US$250 million term loan facility. This new credit facility replaces the company's existing revolving credit facility and is a significant move to bolster its financial flexibility. A key aspect is that US$150 million of the revolving credit facility is contingent on the consummation of the previously announced merger with G&K Services, Inc., highlighting the strategic importance of this acquisition. The financing arrangements include guarantees from the Corporation and its material domestic subsidiaries, with interest rates tied to the company's credit ratings. The agreement also imposes customary covenants and financial ratios, including a maximum leverage ratio of 3.50 to 1.00 and a minimum interest coverage ratio of 3.00 to 1.00, indicating a commitment to maintaining a sound financial structure. These credit facilities are set to mature in September 2021.
Key Highlights
- 1Entered into a new US$600 million revolving credit facility and a US$250 million term loan facility.
- 2The new credit facilities replace Cintas's existing revolving credit facility dated May 28, 2004.
- 3US$150 million of the revolving credit facility is contingent on the successful completion of the merger with G&K Services, Inc.
- 4The credit facilities are guaranteed by Cintas Corporation and certain domestic subsidiaries.
- 5Interest rates are variable, based on the Eurodollar rate or base rate plus an applicable margin influenced by S&P and Moody's credit ratings.
- 6The agreement includes financial covenants requiring a leverage ratio of consolidated indebtedness to consolidated EBITDA of no more than 3.50 to 1.00 and an interest coverage ratio of consolidated EBIT to consolidated interest expense of at least 3.00 to 1.00.
- 7The Revolving Credit Facility and Term Loan Facility mature in September 2021.