Summary
Flex Ltd. (FLEX) announced on July 21, 2022, the execution of a new $2.5 billion Credit Agreement, effective July 19, 2022. This new revolving credit facility, maturing in July 2027, replaces the Company's prior $2.0 billion facility which was set to expire in January 2026. The new facility provides enhanced financial flexibility with a larger borrowing capacity and a longer maturity, indicating the company's proactive approach to managing its capital structure and ensuring liquidity for its ongoing operations and strategic initiatives. Key features of the New Credit Facility include options for interest rates based on either a Base Rate or Term SOFR, with margins and fees that are adjustable based on Flex's credit ratings and importantly, linked to sustainability targets. The facility also permits potential increases of up to $500 million through incremental term loan facilities or revolving commitment increases, subject to lender commitments. The agreement is unsecured and contains customary covenants and events of default, alongside financial maintenance covenants such as a maximum total debt to EBITDA ratio and a minimum interest coverage ratio.
Key Highlights
- 1Entered into a new $2.5 billion revolving credit facility maturing on July 19, 2027.
- 2The new facility replaces the prior $2.0 billion credit agreement, extending the maturity by approximately 3.5 years.
- 3Includes sublimits for swing line loans ($360 million) and letters of credit ($175 million).
- 4Allows for potential increases of up to $500 million in aggregate through incremental facilities or commitment increases.
- 5Features interest rates tied to Base Rate or Term SOFR, with margins adjusted based on credit ratings.
- 6Incorporates sustainability-linked adjustments (up to 0.05% for interest/LC fees, 0.01% for commitment fees) tied to workplace safety and GHG emissions.
- 7The facility is unsecured and includes customary covenants and financial maintenance requirements (e.g., debt/EBITDA, interest coverage ratios).