Summary
On July 20, 2016, Fastenal Company (FAST) entered into a Master Note Agreement with a group of investors, including Metropolitan Life Insurance Company, NYL Investors LLC, and PGIM, Inc., allowing for the issuance of senior unsecured promissory notes up to an aggregate principal amount of $200 million over a three-year period. These notes will be guaranteed by certain material subsidiaries and can bear either fixed or floating interest rates, with maturities of up to 12 years for fixed-rate and 10 years for floating-rate notes. The proceeds are intended for general corporate purposes, including working capital, debt repayment, capital expenditures, dividends, and stock repurchases. As of the effective date, Fastenal has already issued two series of notes under this agreement: $40 million in fixed-rate notes at 2.00% maturing in July 2021, and $35 million in fixed-rate notes at 2.45% maturing in July 2022. The company intends to use the proceeds from these initial issuances to fund the purchase of industrial vending lockers. Notably, the agreement includes covenants requiring Fastenal to maintain specific leverage and EBITDA ratios, with current metrics well within the required limits, and offers lenders "most favored lender" status regarding financial covenants.
Key Highlights
- 1Fastenal entered into a Master Note Agreement allowing for up to $200 million in senior unsecured notes over three years.
- 2The notes are guaranteed by certain material subsidiaries.
- 3Interest rates can be fixed or floating (based on LIBOR), with maturities up to 12 years.
- 4Proceeds can be used for working capital, debt repayment, acquisitions, capital expenditures, dividends, and stock repurchases.
- 5Initial issuances of $40 million (2.00% fixed) and $35 million (2.45% fixed) were made on the effective date to fund vending locker purchases.
- 6The agreement includes financial covenants, such as a maximum consolidated total leverage ratio of 2.00:1.00 and a minimum consolidated EBITDA of $400 million, with current pro forma ratios well within compliance.
- 7A 'change in control' event would trigger an offer to prepay all outstanding notes.