What is the primary purpose of these new credit facilities?

The primary purpose of the $4.0 billion Term Loan and the $3.0 billion Revolving Credit Facility is to provide financing for Freeport-McMoRan's previously announced acquisitions of McMoRan Exploration Co. (MMR) and Plains Exploration & Production Company (PXP).

How will the funds from the Term Loan be disbursed?

The disbursement of funds under the Term Loan depends on the order in which the MMR and PXP acquisitions are consummated. If MMR closes first, $2.5 billion will be available, followed by the remaining amount up to $4.0 billion upon PXP's closure. If PXP closes first, up to $4.0 billion will be available, with a lesser amount available upon MMR's subsequent closure.

What are the key financial covenants FCX must adhere to?

FCX must maintain a total leverage ratio not exceeding 3.75 to 1.00 and an interest expense coverage ratio of not less than 2.50 to 1.00 under both the Term Loan and the Revolving Credit Facility.

What happens to the Revolving Credit Facility upon the PXP acquisition?

Upon consummation of the PXP acquisition, the surviving entity of PXP will become a borrower under the new Revolving Credit Facility. This new facility replaces FCX's existing revolving credit agreement.

FCX 8-K: Material Agreements & Financial Events

Summary

Freeport-McMoRan Inc. (FCX) announced the entry into a new $4.0 billion Term Loan and a $3.0 billion Revolving Credit Facility, both dated February 14, 2013. These credit facilities are primarily intended to finance FCX's previously announced acquisitions of McMoRan Exploration Co. (MMR) and Plains Exploration & Production Company (PXP). The Term Loan is structured to provide funds sequentially, depending on the closing order of the two acquisitions, and will mature in five years with amortization beginning in the second year. The Revolving Credit Facility replaces FCX's existing agreement and will also mature in five years, available for revolving loans, letters of credit, and swingline loans, with a sub-limit for PT Freeport Indonesia. Both credit facilities include customary covenants, including financial maintenance covenants requiring a total leverage ratio not to exceed 3.75 to 1.00 and an interest expense coverage ratio of at least 2.50 to 1.00. The Plains Exploration & Production Company (PXP) surviving entity will become a borrower under both facilities upon the consummation of its acquisition. This move signifies FCX's proactive financing strategy to secure capital for its significant strategic acquisitions, bolstering its operational capacity and future growth potential.

Key Highlights

1FCX secured a $4.0 billion Term Loan to finance its acquisitions of McMoRan Exploration Co. (MMR) and Plains Exploration & Production Company (PXP).
2A new $3.0 billion Revolving Credit Facility was established, replacing the existing agreement and providing ongoing liquidity.
3The availability of funds under the Term Loan is contingent on the closing order of the MMR and PXP acquisitions.
4Both credit facilities have a five-year maturity, with the Term Loan including phased amortization starting in the second year.
5The surviving entity of the PXP acquisition will become a borrower under both the Term Loan and Revolving Credit Facility.
6Key financial covenants include a maximum total leverage ratio of 3.75:1.00 and a minimum interest expense coverage ratio of 2.50:1.00.
7PT Freeport Indonesia has a limited borrowing capacity of $500 million under the Revolving Credit Facility.

FREEPORT-MCMORAN INC 8-K Report, Material Agreement (Feb 19, 2013)

Summary

Key Highlights

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