Summary
Honeywell International Inc. (HON) filed an 8-K on April 27, 2018, reporting the entry into two significant credit agreements. The company secured a $1.5 billion 364-Day Credit Agreement and a $4.0 billion Amended and Restated Five-Year Credit Agreement. These agreements are primarily for general corporate purposes and provide Honeywell with substantial liquidity and financial flexibility.
Key Highlights
- 1Honeywell entered into a $1.5 billion 364-Day Credit Agreement for general corporate purposes, maturing on April 26, 2019.
- 2The company also entered into a $4.0 billion Amended and Restated Five-Year Credit Agreement, which can be increased up to $4.5 billion, maturing on April 27, 2023.
- 3Both credit agreements are available for general corporate purposes and do not contain financial covenants or restrict dividend payments.
- 4Standard events of default, such as non-payment, covenant breaches, cross-defaults, and insolvency, are included in both agreements.
- 5Lender commitments under both agreements can be terminated if a person acquires 30% or more of Honeywell's voting stock or if there's a change in board majority without director nominee approval.
- 6Interest rates for borrowings under both agreements are based on either a Base Rate or Eurocurrency Rate plus an Applicable Margin, which is tied to Honeywell's credit default swap spread and public debt rating.
- 7Commitment fees on unused portions of the credit facilities are payable, with rates varying based on Honeywell's Public Debt Rating from major credit agencies.
Frequently Asked Questions
These credit agreements are primarily for general corporate purposes. This means Honeywell can use the funds for a variety of needs, such as working capital, strategic investments, or other operational requirements.
No, importantly, neither the 364-Day Credit Agreement nor the 5-Year Credit Agreement contain financial covenants. They also do not restrict Honeywell's ability to pay dividends to its shareholders.
The primary difference is the maturity date and the amount. The 364-Day Credit Agreement is for $1.5 billion and matures in just under a year (April 2019), likely serving short-term needs. The 5-Year Credit Agreement is for a larger $4.0 billion (extendable to $4.5 billion) and matures in five years (April 2023), providing longer-term financial flexibility.
While the agreements don't terminate based on debt rating decreases or material adverse changes, lender commitments can be terminated under specific circumstances. These include a change in control event where an entity acquires 30% or more of Honeywell's voting stock, or a significant shift in the board of directors' composition without proper approval processes.