Summary
On March 30, 2020, Honeywell International Inc. (HON) filed an 8-K report detailing the entry into a $6 billion Delayed Draw Term Loan Agreement, effective March 26, 2020. This facility, maturing in two years, is intended to enhance financial flexibility, bolster liquidity, and strengthen the company's resilience during uncertain economic times. The agreement allows for draws on up to three separate business days before June 26, 2020, with the potential to increase the facility by an additional $2 billion through new commitments. Importantly for investors, the Term Loan Agreement does not impose financial covenants or restrict dividend payments. However, it does include customary events of default, such as non-payment, covenant breaches, cross-defaults, bankruptcy, and specific ERISA obligations. Lender commitments can be terminated under certain change-of-control scenarios, including significant stock acquisitions (30%+) or board composition changes. Interest rates are tied to either a Base Rate or Eurodollar Rate, with an "Applicable Margin" that adjusts based on Honeywell's senior unsecured debt rating, ranging from 1.000% to 1.500% for Eurodollar advances. A ticking fee for unused commitments also applies, based on credit ratings.
Key Highlights
- 1Honeywell secured a $6 billion Delayed Draw Term Loan Facility to enhance financial flexibility and liquidity.
- 2The facility is for general corporate purposes and has a maturity date of March 26, 2022.
- 3The agreement allows for an optional increase in commitments by an additional $2 billion.
- 4No financial covenants or dividend restrictions are imposed by the Term Loan Agreement.
- 5Interest rates are variable, based on Base Rate or Eurodollar Rate plus an "Applicable Margin" tied to credit ratings.
- 6A ticking fee is payable on unused portions of the loan commitment.
- 7Events of default include non-payment, covenant breaches, and change-of-control provisions.