Summary
Ecolab Inc. (ECL) filed an 8-K on September 8, 2011, to report the entry into new Senior Credit Facilities, comprising a $2.0 billion 364-day revolving credit facility and a $1.5 billion 5-year revolving credit facility. These facilities replace a prior agreement and are intended for general corporate purposes, including share repurchases, debt repayment, acquisitions, and importantly, funding for the previously announced merger with Nalco Holding Company. The new credit facilities provide Ecolab with significant financial flexibility and liquidity, underscoring its strategic initiatives and operational needs.
Key Highlights
- 1Ecolab entered into two new unsecured revolving credit facilities: a $2.0 billion 364-day facility and a $1.5 billion 5-year facility, totaling $3.5 billion.
- 2The new facilities replace Ecolab's prior $600 million credit facility, which was terminated.
- 3Funds from the Senior Credit Facilities are designated for general corporate purposes, including share repurchases, debt repayment, and acquisitions.
- 4A significant stated use of funds is to support the previously announced merger with Nalco Holding Company.
- 5The facilities offer flexible borrowing options, including base rate or LIBOR-based interest rates plus applicable margins.
- 6The agreements include financial covenants, such as a minimum interest expense coverage ratio, and standard covenants for credit facilities.
- 7The filing also serves as a communication related to Rule 425 under the Securities Act concerning the proposed merger with Nalco.
Frequently Asked Questions
The Senior Credit Facilities are intended for general corporate purposes. This includes supporting Ecolab's operations, facilitating share repurchases, repaying existing debt, and financing acquisitions, with a specific mention of funding the previously announced merger with Nalco Holding Company.
These new facilities represent a significant increase in available credit. They replace a prior $600 million credit facility with a combined total of $3.5 billion across a short-term (364-day) and a longer-term (5-year) facility, providing enhanced financial capacity and flexibility.
The facilities allow for borrowings at either a base rate or LIBOR plus an applicable margin. They include subfacilities for letters of credit and swing line loans under the 5-year facility. Ecolab is required to pay facility fees and fees on letters of credit, with rates determined by its credit rating. Financial covenants, including an interest expense coverage ratio, are also in place.
The new credit facilities are explicitly stated to be used for general corporate purposes, including acquisitions, and specifically to assist in funding the previously announced merger with Nalco Holding Company. This indicates the credit facilities are a crucial component of the financing plan for this significant transaction.