Summary
Freeport-McMoRan Inc. (FCX) filed an 8-K on June 3, 2020, primarily detailing a significant Third Amendment to its Revolving Credit Facility and important changes to its Corporate By-Laws. The credit facility amendment introduces a "Covenant Increase Period" lasting until at least January 1, 2022, during which financial covenants like the Total Leverage Ratio are temporarily suspended or relaxed. A new minimum liquidity covenant of $1.0 billion is introduced, and the Interest Expense Coverage Ratio has adjusted limits. These changes provide FCX with increased financial flexibility during a potentially challenging period, particularly as the company had no outstanding borrowings and substantial availability under the facility at the time of the filing. In addition to the credit facility adjustments, FCX's Board of Directors amended and restated the company's By-Laws, effective the same date. Key changes include modifications to the advance notice window for stockholder proposals and director nominations, the addition of an exclusive forum provision, and adjustments to special meeting requirements, among other housekeeping and DGCL-aligned updates. The filing also covers the results of the 2020 Annual Meeting of Stockholders, where directors were elected, independent auditors ratified, and executive compensation approved on an advisory basis.
Key Highlights
- 1Third Amendment to Revolving Credit Facility: Temporarily suspends the Total Leverage Ratio covenant through June 30, 2021, and adjusts other financial covenants during a "Covenant Increase Period" extending to at least January 1, 2022.
- 2New Minimum Liquidity Covenant: Introduces a requirement for $1.0 billion in minimum liquidity (cash and credit facility availability) applicable through June 30, 2021, or the end of the Covenant Increase Period.
- 3Restricted Payments Limitation: FCX's ability to declare or make restricted payments is eliminated during the Covenant Increase Period, subject to exceptions, tightening capital allocation flexibility.
- 4Increased Borrowing Costs: Pricing for drawn and undrawn amounts under the Revolving Credit Facility is increased during the Covenant Increase Period.
- 5By-Laws Amendments: Key changes include a revised advance notice period for stockholder proposals and director nominations (120-90 days prior to anniversary of prior year's meeting), an exclusive forum provision, and updated rules for special meetings and board vacancies.
- 6Annual Meeting Results: Stockholders elected all six director nominees, ratified Ernst & Young LLP as independent auditors, and approved executive compensation on an advisory basis.
- 7Strong Credit Facility Position: As of June 3, 2020, FCX had no borrowings outstanding under the Revolving Credit Facility, with approximately $3.5 billion in availability, indicating robust liquidity despite covenant adjustments.