Summary
TechnipFMC plc (FTI) announced amendments to its senior unsecured revolving credit facilities on June 15, 2020, relating to a $2.5 billion RCF and a €500 million Euro Facility. The key change allows the company to include approximately $3.2 billion of goodwill in the calculation of its Consolidated Net Worth for the purpose of compliance with the Total Capitalization Ratio covenant. This amendment is permanent and effective through the respective maturities of the credit facilities.
Key Highlights
- 1Amendments made to $2.5 billion RCF and €500 million Euro Facility on June 12, 2020.
- 2Goodwill impairment of approximately $3.2 billion (recognized in Q1 2020) can now be included in Consolidated Net Worth calculations.
- 3This change impacts the Total Capitalization Ratio covenant, a key financial metric for credit facility compliance.
- 4The amendments are permanent for calculating the Total Capitalization Ratio, providing ongoing flexibility.
- 5If these amendments had been effective as of March 31, 2020, the Total Capitalization Ratio would have been 38%.
- 6The Total Capitalization Ratio covenant threshold remains unchanged at 60% at the end of any financial quarter.
- 7These changes were made to ensure continued compliance with financial covenants.
Frequently Asked Questions
TechnipFMC amended its credit facilities to improve its compliance with the Total Capitalization Ratio covenant. The amendments allow the inclusion of previously impaired goodwill in the calculation of Consolidated Net Worth, which strengthens the company's financial position relative to its debt.
Including goodwill can significantly increase the 'Net Worth' component of the Total Capitalization Ratio. This is particularly relevant as the company recognized a substantial goodwill impairment in the first quarter of 2020, and this amendment prevents that impairment from negatively impacting its ability to meet its debt covenants.
The Total Capitalization Ratio is a financial covenant typically calculated as Total Debt divided by Total Capitalization (which includes debt and equity, or net worth). By allowing goodwill to be included in net worth, the amendments effectively lower the company's calculated Total Capitalization Ratio, making it easier to stay below the 60% threshold and avoid potential default.
No, these amendments do not change the actual amount of debt TechnipFMC has or its ability to draw down on its revolving credit facilities. The changes are purely accounting adjustments for the purpose of covenant compliance calculations.