01—Abstract
Summary
Summary of the 8-K filed August 6, 2024. Cited figures are marked; the original filing is the authoritative source.
HP Inc. entered into a five-year sustainability-linked revolving credit facility dated August 1, 2024, with lenders named therein and JPMorgan Chase Bank, N.A. as administrative agent.
BNP Paribas served as Sustainability Structuring Agent. The facility provides senior, unsecured revolving commitments of $5.0 billiona, with an option to increase commitments by up to an additional $1.0 billion subject to lender consent. It allows borrowings in US dollars, euros and pounds sterling, with swingline borrowings up to $1.5 billion.
Commitments are available through August 1, 2029, extendable on up to two occasions for one-year periods subject to lender consent. The company may designate subsidiaries as borrowers, and HP will guarantee their borrowings. Pricing is based on Term SOFR, Adjusted Daily Simple RFR or Alternate Base Rate plus an applicable margin, with a commitment fee of 9 to 22.5 basis points on unused commitments depending on HP's long-term senior unsecured debt rating.
Margins and fees can adjust up or down based on achieving specified sustainability targets for digital equity and product circularity. The agreement includes a maximum consolidated total debt to consolidated EBITDA ratio of 4.0 to 1.0, tested at each fiscal quarter end, along with customary restrictions on subsidiary debt, liens and fundamental changes, and customary events of default including change of control. Concurrently with the new facility, HP terminated its five-year sustainability-linked revolving credit facility dated May 26, 2021, which was due to expire May 26, 2026.
The company states it incurred no early termination penalties. The filing also notes that lenders and their affiliates have provided and may provide other financial services to HP for customary fees.
02—Key points
Key Highlights
- New five-year, senior unsecured sustainability-linked revolving credit facility with $5.0 billion in aggregate commitments, expandable by up to $1.0 billion subject to lender consent
- Commitments available through August 1, 2029, with up to two one-year extension options subject to lender consent
- Multi-currency borrowing capability in US dollars, euros and pounds sterling, with swingline borrowings up to $1.5 billion
- Pricing tied to sustainability targets for digital equity and product circularity, with margins and commitment fees that can move up or down
- Commitment fee of 9 to 22.5 basis points on unused commitments, depending on HP's long-term senior unsecured debt rating
- Financial covenant requires consolidated total debt to consolidated EBITDA not to exceed 4.0 to 1.0 at each fiscal quarter end
- Prior $5.0 billion-equivalent sustainability-linked facility dated May 26, 2021 was terminated concurrently with no early termination penalties
03—Questions
Frequently Asked Questions
What is the size and term of HP's new revolving credit facility?
The facility provides $5.0 billion in aggregate lending commitments, with an option to increase by up to an additional $1.0 billion subject to lender consent. Commitments are available through August 1, 2029, and may be extended on up to two occasions for one-year periods, subject to lender consent.
How is the cost of borrowing determined under the new facility?
Borrowings bear interest at Term SOFR (including Adjusted Term SOFR), Adjusted Daily Simple RFR or the Alternate Base Rate, at HP's option, plus an applicable margin. HP also pays a commitment fee of 9 to 22.5 basis points on unused commitments, depending on the rating of its long-term senior unsecured debt. Both margins and fees can adjust based on sustainability targets for digital equity and product circularity.
What financial covenant applies to HP under the facility?
HP may not permit its ratio of consolidated total debt to consolidated EBITDA to exceed 4.0 to 1.0 as of the last day of any fiscal quarter. The agreement also includes customary limits on subsidiary indebtedness, liens and fundamental change transactions.
Did HP replace an existing credit facility, and were there any costs?
Yes. Concurrently with entering the new facility on August 1, 2024, HP terminated its five-year sustainability-linked revolving credit facility dated May 26, 2021, which was due to expire May 26, 2026. HP states it incurred no early termination penalties.
04—Continue