Summary
Flex Ltd. (FLEX) announced on December 1, 2016, the execution of a new $700 million term loan agreement, effective November 30, 2016. This new facility replaces and repays outstanding loans under a previous agreement, with the majority of funds used to retire existing debt and the remainder for general working capital purposes. The new term loan matures in November 2021 and provides the company with flexibility to add up to $150 million in incremental facilities. The company has secured a significant financing arrangement that refinances existing debt and provides additional liquidity. Investors should note the terms of the new loan, including its unsecured nature, interest rate options (based on prime rate or LIBOR plus applicable margins), and covenants related to debt, investments, acquisitions, liens, asset disposals, distributions, and affiliate transactions. The agreement also includes financial maintenance covenants requiring a maximum total indebtedness to EBITDA ratio and a minimum interest coverage ratio, though the latter can be suspended under certain conditions. The financing is supported by guarantees from certain subsidiaries.
Key Highlights
- 1Flex Ltd. entered into a new $700 million unsecured term loan agreement effective November 30, 2016.
- 2The new term loan facility matures on November 30, 2021.
- 3The company borrowed the full $700 million amount, using approximately $570.8 million to repay existing term loans.
- 4The remaining proceeds from the new loan will be used for general working capital purposes.
- 5The agreement allows for potential incremental term loan facilities up to an aggregate of $150 million.
- 6Interest rates are variable, tied to either the prime rate or LIBOR, plus an applicable margin based on credit ratings.
- 7The loan includes customary covenants and financial maintenance covenants, such as maximum debt-to-EBITDA and minimum interest coverage ratios.